Center

Bank of China plans to sell yuan bonds in HK

(Bloomberg)
Updated: 2007-05-28 13:32

Bank of ChinaLtd., the nation's second-biggest lender, plans to sell as much as 3 billion yuan ($392 million) of bonds inHong Kongin what may be the city's first sale of yuan bonds.

Related readings:  Central bank raises interest rates, bank reserve requirments  BOC unaffected by US$21m loan scandal  BOC opens private banking service for millionaires

The debt will have a maturity of up to three years, theBeijing-based lender said in a statement to theShanghai Stock Exchangetoday. The yuan has risen 5.8 percent in the past year against the Hong Kong dollar.

The sale allows local investors to profit from gains in the yuan against the Hong Kong dollar, whose exchange rate is fixed to the U.S. dollar.

"It's a nice investment as you get the pick-up on the currency appreciation and importantly, spurs the development on the yuan bond market," said Ben Simpfendorfer, a currency strategist at Royal Bank of Scotland Plc in Hong Kong. "It's another step for the integration between the two economies."

China's Cabinet and central bank in January said the country's companies will be allowed to sell yuan-denominated bonds in Hong Kong. The Hong Kong Monetary Authority, that's kept the currency pegged at around 7.8 to the dollar since 1983, said May 24 that it has no plans to switch to a link to the yuan.

Bank of China's Hong Kong-listed shares fell 1 percent to HK$3.85 on May 25, extending this year's decline to 10 percent.China Construction Bank, also based in Beijing, last month said it may sell 5 billion yuan of bonds in Hong Kong.