News
China navigates market turmoil
Bonds Demand lower than last year against weak market backdrop, trade disputeBY CAROL CHANChina managed to attract strong
demand for a tightly-priced
US$3bn sovereign bond, its
second foray in the international
market in as many years, despite
a global market sell-off during
bookbuilding.
However, the weak overall
market backdrop and the US-
China trade war meant the new
issue was not as spectacular as
last year’s return to the US dollar
bond market, which was the
sovereign’s first issue since 2004.
In particular, spreads were
wider than a year ago, following
the sell-off across emerging
market assets triggered by
interest rate increases in the US.
The PEOPLE’S REPUBLIC OF CHINA,
rated A1/A+/A+, acting through
the Ministry of Finance, last
Thursday issued US$1.5bn 3.25%
five-year, US$1bn 3.5% 10-year
and US$500m 4.0% 30-year
notes 30bp, 45bp and 70bp
wide of Treasuries, inside 50bparea, 65bp area and 90bp area
guidance, respectively. Final
orders reached US$13.2bn, or 4.
times the issue size.
A banker from a Chinese bank
on the deal said the syndicate
had discussed whether to givea more generous initial price
guidance on Thursday morning
following an overnight tumble
on Wall Street, where US stocks
suffered their worst fall in eight
months, with the S&P 500 and
Dow Jones indices each droppingmore than 3%.
“We set IPG ahead of the
sudden slump of US stocks. We
are aware that investors will
ask for more concession for the
new issue due to the market
situation. But we think high-Pakistan puts IMF on the spot 06 Help for Indian NBFCs 06 Thailand bets on blockchain 08
Lenders brace for trade war
Loans Business from China to take further hit as TMT sector gets in the crosshairsBY PRAKASH CHAKRAVARTI,
YAN JIANG, APPLE LAMInternational lenders are taking
the vetting of potential Chinese
borrowers to previously unheard
of lengths as the US-China
trade war intensifies, dealing a
further blow to already flagging
syndicated loans to China.
“For any new borrowings, no
matter bilateral or syndicated,
we are first taking a careful
look at the borrowers’ exposure
to the US market because of
the escalating trade war. That’s
regardless of whether they
are existing or new clients,”
a banker at an international
lender in Shanghai said.In the first nine months
of the year, internationally
syndicated lending to China
was 15% lower, at US$72.62bn,
than a year earlier because of
the slowing Chinese economy
and lower M&A activity.
M&A loans from China were
46% lower in the first three
quarters, at US$5.51bn, from a
year earlier.
Bankers see China’s
manufacturing and technology,
media and telecom sectors
as the most at risk from the
trade war, as tit-for-tat tariffs
ratchet up the pressure on the
country’s major exporters.
“No one wins in a trade war,
but the immediate impact willbe on the domestic economy
in China. PRC suppliers to US
companies are on the radar and
most vulnerable in the current
situation,” a senior loan banker
in Hong Kong said.
China’s TMT sector has
raised only US$1.7bn of
internationally syndicated
loans this year with another
US$600m in the market, which
is the lowest volume since
2014, and pales in comparison
to full-year amounts of
US$11.6bn in 2017 and
US$24.4bn in 2016.FEELING THE HEAT
In addition to the trade war,
China’s TMT is feeling the heatfrom increased scrutiny in the
US over allegations of cyberwar,
hacking and sanctions-busting,
with the misadventures
of some recent borrowers
providing a cautionary tale to
lenders.
Super Micro Computer,
which closed a US$285m 364-
day loan in mid-April according
to LPC data, for instance
found itself in the spotlight
on October 4 when Bloomberg
reported that computer
servers manufactured by the
company had been infiltrated
by malicious computer chips
inserted by Chinese intelligence
agents. Although the report
was strongly denied by alleged
targets of the spying, including
Apple and Amazon, shares of
US-listed Super Micro plunged
40% as a result.
Bank of America Merrill