LONDON Feb 14 Sales of panda bonds -
yuan-denominated debt sold in China by foreign firms or
governments - soared to 130 billion yuan ($19 billion) last year
and could increase another 50 percent in 2017, according to
The bank's emerging market strategist, Ying Gu, said on
Tuesday that last year's sales were close to nine times 2015
levels, though tighter money transfer rules weighed on issuance
by foreign borrowers.
"The size of the panda bond market has been growing very
quickly," Gu told Reuters, adding growth was driven mostly by
banks, real estate companies and other non-financial corporates.
Other than Daimler, HSBC and Standard Chartered, however,
few issuers were foreign. "If you look at the issuer profile,
most of them are overseas subsidiaries of Chinese companies,"
"Regulators did not encourage issuers to repatriate panda
proceeds from China, which could be a concern for some foreign
issuers," he said.
"The progress in relaxing institutional barriers has
been slower than I had expected but, in the second half of 2016,
the fact remained that the capital outflow situation
deteriorated and that's why we did not see a big-bang opening."
Beijing is grappling to stem an exodus of capital which may
have amounted to a record $725 billion last year, according to
the Institute of International Finance.
This is the latest hurdle for the panda market, which was
pioneered more than a decade ago but has only taken off over the
last couple of years as Chinese policymakers finally allowed
foreign issuers into domestic bond markets.
It still comprises only a tiny fraction of China's total
onshore bond market, the world's third biggest.
Last year, Poland raised 3 billion yuan in panda bonds while
the National Bank of Canada became the first North
American financial institution to tap that market. Aluminium
firm Rusal is planning Russia's first panda issue.
"We won't see a lot of foreign issuers this year but the
growth in overall issuance will also slow down," Gu said, noting
that the spike in domestic yields towards the end of 2016 had
also curbed local demand for bonds.
The panda market's recent popularity has coincided with a
decline in sales of dim sum bonds - yuan debt sold offshore in
markets such as Hong Kong or London.
Gu did not provide figures for dim sum bond issuance but
ThomsonReuters data shows sales worth $22.6 billion last year -
less than half 2014 volumes.
(Reporting by Sujata Rao; editing by John Stonestreet)