China firms plan up to US$15 billion in overseas bond issues in Q4 on stimulus boost, say bankers

SYDNEY: Chinese investment-grade companies are lining up US$10 billion to US$15 billion in offshore bond offerings this quarter, as Beijing’s economic stimulus measures cut fundraising costs and whip up borrowers’ appetites, financial advisers said.
Those levels mean Chinese companies are poised to raise the most fourth-quarter offshore debt in three years. They garnered about US$5.9 billion in dollar and euro bonds just last week, making it the busiest week for offshore debt fundraising in 2024, Dealogic data showed.
“The positive momentum from the stimulus measures and the expected FOMC rate cuts could nudge issuers who are nimble and ready to come to market more quickly – they could look at windows in the coming weeks,” said Xixi Sun, Citigroup’s head of greater China bond syndicate.
China, in the past fortnight, has launched a massive stimulus program that included cutting lending and mortgage interest rates, in an attempt to resuscitate the country’s crisis-hit property sector.
Beijing also plans to issue about 2 trillion yuan (US$285 billion) worth of sovereign bonds this year to boost household consumption, Reuters reported last week, citing sources with knowledge of the matter.
Ratings agency Fitch said in a report this week that China’s move to loosen the country’s credit conditions was at a faster pace than it had anticipated.
The Federal Reserve cut interest rates by 50 basis points last month, putting the US economy firmly on a path of lower interest rates.
Credit spreads for Chinese investment-grade firms have tightened by 10 to 20 basis points since the government’s stimulus measures were announced last month, bankers said, indicating investors’ risk appetite towards China was improving.
Falling interest rates and tighter credit spreads will reduce funding costs for Chinese corporates, they said.
Meituan, China’s biggest delivery platform, raised US$2.5 billion last week in a two-tranche dollar bond that was the country’s first technology sector deal in 2024. Strong demand for the deal meant the final price was up to 30 basis points cheaper than the range first flagged to investors.
Beijing’s stimulus package will encourage corporates to expand their businesses, leading to potential new funding needs and more financing activities via bond or other channels, said UBS vice chairman of global banking for Asia, Mandy Zhu.
The bank sees “strong momentum in the bond market and strong investor demand in both the primary and secondary space,” Zhu said.
The up to US$15 billion of overseas bond offerings planned by the Chinese companies in the current quarter compare with the US$13.8 billion raised in the same period of last year and the US$11 billion raised in the fourth quarter of the year before, according to LSEG data.
The overseas debt issuance rush could continue into next year as Chinese companies obtain regulatory approvals and quotas, said Citigroup’s Sun.
Chinese companies raised the equivalent of US$63.33 billion in dollar, euro and yen bonds in the first three quarters of 2024, LSEG data showed, up from US$44.1 billion in the same period of last year.
Despite the increase, China’s offshore debt issuance is down by more than half compared to the peak of US$150.1 billion in the first three quarters of 2020 when pandemic stimulus measures globally prompted record amounts of such deals.