BoC emerges as Hong Kong’s top CNY-denominated bond underwriter

The Beijing-based bank beats HSBC in Dim Sum market in October.

Bank of China Ltd. is overtaking HSBC Holdings Plc. to become the top underwriter of yuan bonds in Hong Kong this month after Vice Premier Li Keqiang allowed domestic companies to tap the city’s lower borrowing costs.

The Beijing-based lender managed three Dim Sum bond sales valued at 2.7 billion yuan ($424 million) in October, for a 31 percent share of all issuance, beating HSBC, the biggest underwriter in the year, with a 14 percent stake, data compiled by Bloomberg show. Bank of China’s deals include issues for the Hong Kong units of China National Petroleum Corp., the country’s biggest oil company, and Sinotrans Shipping Inc., the third- largest shipper.

Global investors, which have limited access to bonds in the rest of China, will soon be offered the first Dim Sum debt from local companies as the nation seeks to bolster Hong Kong’s status as a financial hub. Baosteel Group Corp., China’s second- largest steelmaker, won cabinet approval on Oct. 20 to raise 6.5 billion yuan. The average yield on the debt rose to a record 3.69 percent this month, less than the 5.35 percent for top- rated three-year corporate bonds in Shanghai and the lowest local borrowing costs among the biggest emerging markets.

“Main lenders to Chinese companies will most likely become the underwriters of their Dim Sum bonds,” Shi Lei, the head of fixed-income research at Ping An Securities Co., a unit of the country’s second-biggest insurer, said by phone from Beijing yesterday. “The Dim Sum bond market is currently marked by strong demand and it’s a seller’s market. Institutions which previously won deals for their familiarity with local investors will be less advantaged than those who can bring in new issuers.”

Dim Sum issuance jumped to 131 billion yuan this year from 35.7 billion yuan in 2010, data compiled by Bloomberg show. HSBC managed 21.6 percent of sales, including issues by U.K. retailer Tesco Plc and Germany’s Volkswagen AG, and Standard Chartered Plc. comes in second in the year with a 12 percent share. Deutsche Bank AG has 9 percent and Royal Bank of Scotland Group Plc. 7.7 percent.

The top underwriter last year, Bank of China is fifth in 2011, arranging 6.7 percent of Dim Sum sales, while Industrial & Commercial Bank of China and Agricultural Bank of China Ltd. are also in the top 10.

View the full story in Bloomberg.