International Financing Review Asia February 10 2018 1Upfront
OPINION INTERNATIONAL FINANCING REVIEW ASIAD-share dreams
P
lans to launch a new class of Chinese shares in
Germany are gaining traction, but it would be a
mistake to assume that Frankfurt will one day rival
Hong Kong or the US as a gateway for Chinese equities.
Qingdao Haier, which claims to be the world’s biggest
white-goods manufacturer, is considering a listing of
D-shares on the China Europe International Exchange in
Frankfurt.
CEINEX is a joint venture between German and Chinese
exchanges, and its D-share concept has already won the
blessing of regulators in both countries. Convincing issuers
and investors, however, will be another matter.
At a high level, access to a rich European investor
base looks attractive for a Chinese company with global
ambitions, such as Haier. But it’s hard to imagine the
nascent D-share market competing with more establishedAs and Hs on valuation or liquidity.
CEINEX was conceived as an offshore renminbi
marketplace that would allow European investors to gain
exposure to the Chinese currency through their existing
trading accounts, and its most popular products are ETFs
tracking Chinese equity markets. Trading data isn’t easy
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AVERAGEûDAILYûTRADINGûVOLUMEûWASûAROUNDûüM
Some PRC issuers are coming on board: China
Development Bank listed Green bonds on the exchange
in November. But a big listing from a blue-chip stock like
Haier would be a monumental leap.
European investors do have other ways of taking a view
on Chinese equities, and Haier’s Shanghai shares are
already available to international investors through the
Hong Kong-Shanghai Connect trading link.
A better option would be a trading link along the lines
of Hong Kong’s tie-ups with Shanghai and Shenzhen. A
Frankfurt Connect would meet the same objectives, butwithout creating a new group of instruments that will
inevitably lack the liquidity of their home market.
Haier may well decide to press ahead with a European
listing, especially if it has its eye on future acquisitions in
THEûREGIONû"UTûIFûTHEûMAINûBENElTûOFûAû$
SHAREûLISTINGûISû
marketing, rather than fundraising, initial deals are likely
to be far smaller than the exchange would like.Jumping for junk
I
n a rollercoaster week for global markets, the latest
batch of Asian high-yield bonds deserves close attention.
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US Treasuries are usually disastrous for sub-investment
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week have come from low-rated borrowers, with only one
high-grade issuer clearing the market.
Does this mean Asian investors are still looking to add
risk, regardless of the turmoil in global markets? Or are
these companies simply desperate to raise cash no matter
what price?
Both arguments make sense. Investors see junk bonds as
offering a bigger cushion against rising US Treasury yields,
and they certainly got some juicy coupons, with Sunshine
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2ESOURCESûYIELDINGû
Most issuers, meanwhile, preferred to wait for calmer
times before launching their deals.
Many Chinese issuers have offshore debt quotas due to
expire next month, suggesting a sense of urgency behind
MOSTûOFûTHEûWEEKSûlNANCINGSû3IMILARLY û3OUTHû+OREASû
Daegu Bank, the only high-grade issuer to sell US dollar
bonds during the week, paid a premium to access the
market ahead of an April maturity.
Last week’s volatility presented a better entry point
for brave investors – especially those who were already
prepared to anchor deals before the sell-off. But if the
US market stays shaky, hopes for a repeat of the stellar
PERFORMANCEûOFû!SIANûHIGH
YIELDûINûûMAYûBEûDASHED
Still, the latest batch of high-yield offerings underlines
just how far the Asian market has come in the last couple
of years. Not long ago, high-yield issuers would be the last
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when things turned bearish. The pool of wealth now
available in China and beyond means that is simply no
longer the case.A better option would be a
trading link along the lines
of Hong Kong’s tie-ups with
Shanghai and Shenzhen.