(April 21): MTR Corp Ltd raised HK$18.9 billion (US$2.4 billion) in its first-ever Hong Kong dollar public bond sale, as borrowers increasingly rely on the city’s funding market.
The Hong Kong government majority-owned public transport operator and property developer priced five-, 10- and 30-year green notes to fund or refinance eligible projects, according to a person familiar with the matter who asked not to be identified. The combined order book topped HK$60 billion, the person added.
Most Hong Kong dollar-denominated bond offerings have historically been private placements or unlisted deals. MTR’s prior note issuance in the currency was unlisted and not publicly syndicated, according to data compiled by Bloomberg.
But a growing number of issuers have flocked to the public market of late as the currency’s status as a haven from the conflict in Iran has bolstered demand for securities in the city’s dollars.
Corporate and government issuers had raised HK$34.1 billion from publicly announced deals this year, a record for the period, according to Bloomberg-compiled data. The International Bank for Reconstruction and Development, the World Bank’s lending arm, last week priced an HK$8 billion five-year note, the largest Hong Kong dollar-denominated public bond sold by an international issuer.
Deals are being driven by cheaper funding costs compared to the US dollar market and strong “asset hungry” demand from investors, said Lei Zhu, head of Asian fixed income at Fidelity International.
See also: Hong Kong airport taps local debt boom with US$1.9 bil plan — Bloomberg
In the near term, safe-haven flows into the market highlight its unique position: US dollar-linked, yet shielded from Middle East conflict risk, with a longer-term shift towards the Hong Kong dollar as a global funding currency set to continue through the year, she added.
Hong Kong dollar investments currently focus a lot on private placements and certificates of deposits, which are more buy and hold, said Anitza Nip, head of fixed income research for Asia at Union Bancaire Privée in Hong Kong. An increase in quality issuers could potentially improve liquidity of the market, she said.
German development bank KfW and the Asian Infrastructure Investment Bank issued Hong Kong dollar bonds in January, while the African Development Bank raised HK$3 billion in March.
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