Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (54640)	10/22/2004 4:55:00 AM
From: elmatador	Read Replies (2) \| Respond to of 74559

Asian governments and companies to abandon their traditional allegiance to US dollar debt in favour of the European single currency. European investors flock to E1bn Chinese bond By Francesco Guerrera and Enid Tsui in Hong Kong Published: October 21 2004 12:34 \| Last updated: October 21 2004 12:34 European investors have flocked to China’s E1bn government bond in a move that could prompt Asian governments and companies to abandon their traditional allegiance to US dollar debt in favour of the European single currency. Bankers close to the deal said European pension funds and banks had offered more than E4bn for the 10-year bond - China’s largest euro denominated issue. The strong demand from investors ranging from Finnish pension funds to Italian asset managers vindicated the Beijing government’s decision to break THE tradition and raise most of the funds in euros. The US dollar-tranche of the bond was limited to $500m of five-year notes, compared with previous fund raisings of up to $1bn. Industry experts said the European investors’ response could allay fears by other Asian companies and governments such as South Korea, over lack of demand for their debt among European institutions. Although the euro has made inroads into Asia’s capital markets since its launch five years ago, the dollar is still the currency of choice for the region’s central banks and companies. “In the past, Asian debt issuance has been dollar-centric. The success of this issue may well usher in a new era in which Asian borrowers look to more than one currency,” said Patrick O’Brien, joint head of Asia debt capital markets at UBS, which arranged the euro tranche of the bond with BNP Paribas and Deutsche Bank. Bankers said that more than 40 per cent of the demand for the euro portion of the Chinese issue, which will pay a low level of interest relative to similar bonds, came from investors that had never previously bought into Asian debt. An Hong Kong-based fund manager from an European institution said a growing number of European investors were entering Asia’s debt markets attracted by the improving finances of its companies and countries, and China’s rapid economic growth. Cristian Jonsson, head of UBS Asia debt syndicate, said some 7 per cent of the orders for the euro tranche had come from Finnish pension funds - an unusual source of demand - with Italian and Spanish institutions accounting for another 6 per cent. Unlike previous euro denominated issues from China, which had attracted interest from domestic banks raising questions over the genuine strength of demand, only 3.5 per cent of the orders had come from Chinese institutions. The bulk of the demand came from pension funds and asset managers, leaving hedge funds, a traditional buyer of Chinese bonds, with only 3.5 per cent of the orders, bankers said. The euro tranche, with a coupon of 4.25 per cent, was price to yield 40 basis points over the swap rate - a measure of the interest charged by banks when lending to each other. The US portion, with a coupon of 3.75 per cent, will yield 60 basis points over US Treasuries.