In order to open up the stock exchange bond market to the outside world, guidethe market in serving the Belt and Road (B&R) Initiative, and facilitatefinancial operations incountries andregions along the B&R, Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) havejointly released anotice ondevelopingthe pilot “Belt and Road”bondbusinessrecently.
Insiders noted that theissuanceofB&R bonds havebroadened the channels of direct financing for B&R Initiativeand at the same time reflectedthe spirit of finance serving the real economyand national initiatives,whichwillfurther help intensify financial support for regional economic development and promote the two-way opening of the domestic bonds market.
--Three financing modesto function in a row
The notice specifiedthe maininstitutional arrangement of B&R bonds, marking anew step of the stock exchange bond market towardsservingthe B&R Initiative.
According to SSE, the exchangehas carried out in-depth studies and promotion of B&R bondsto givefullplay to the role of the stock exchange bond market in serving the B&Rconstruction.
In addition, the noticeis a significant move by the stock exchanges tofurther implement national initiatives, extend the characteristic service chain and serve the B&R Initiative based on their previous experience in piloting B&R businesses, said an SZSE senior.
“The notice has broadened the channels of direct financingfor the B&R construction. It will also attract more social and international capital to participate in the B&Rconstruction,” said Cui Jian, an analyst at Bohai Securities.
Moreover, the notice specifiedthat the stock exchanges will specially designate staff responsible for B&Rbond declarationand review so as to improve the efficiency of B&Rbondlisting. At the same time, it proposedthe establishment of B&R bonds sector, besidesduly releasing the Belt and Road Bond Index in association withsecurities index construction institutions and perfecting the mechanism of B&R construction investment and financing.
--Companies proposetoissuebondsworth50 billion yuan
In recent years, the stock exchange bond market has beenmaking beneficial attempts at boosting B&R financial integration and serving the B&R progress.
In this regard, SSE has been promoting the issuance of B&R bonds. In terms of “bringing in”, in March 2017,Russia’s UC RUSAL issuedthe first panda bond of 1 billion yuan on SSEamong B&R enterprises. Meanwhile, in terms of “going global”,in January2018,Hongshi Holding Group issued a bond of300 million yuan on SSE topromote the B&Rconstruction in Laos, becoming the first bond issued by a Chinese enterprisefor B&R development.
Underthe national initiative,SZSE has been working to shape an innovative mode for investment and financing for B&R. In this regard, it has successfully launched a number of pilot B&R bond projects.
Listed on the main board market of SZSE,Hengyi PetrochemicalCo., Ltd. issued a B&R corporate bond on March 5, marking the further enrichment of B&R bond issuers.
According to statistics, as many as seven domestic and foreign enterprises have gained approval from the China Securities Regulatory Commission (CSRC) orreceived no objection letters from SSE and SZSE for issuing B&R bonds, with a proposed total amount of 50 billion yuan. In addition, four of them have issued B&R bonds worth 3.5 billion yuan.
B&R bonds, as necessary instruments for the Chinese capital market serving the B&R Initiative, will systematically enhance the value of the Chinese capital market in the global financial market, said WangSheng, executive head of the investment banking departmentwith China International Capital Corporation Limited, addingthat these bonds will enrich bond market issuers and bond varieties, and help investors find better investment opportunities.
--Promoting capital market cooperation under B&R
The launch of B&R bonds will further open the financial market to the outside world, enhance international exchanges and cooperation, and further enrich its existing system of financial products.
“B&R special bonds can support overseas construction enterprises in seeking financing in China, deepen these enterprises’ understanding of the Chinese market, promote the two-way opening of the domestic bond market, and further internationalize the Renminbi and boost its regional influence,” said Jiang Chao, chief macro bond researcher at Haitong Securities.
Meanwhile, SSE has recently negotiated with anumber of B&R countriesfor the issuance of B&R corporate bonds and asset-backed securities. And the issuance is expected tofurther provide financialaidforthe B&R construction.
In the next period, SSEwill explore the possibilities of realising B&R equity financing. It also plans to cooperate with overseas stock exchanges in equity investment and other fields, and further improve the mechanism of B&R panda bond financing, thereby promoting and organizing capital market cooperation and building a community of shared interest and common destiny in the B&R capital market.
Through the notice’s release, SZSE aimedto employ diverse means for intensifying the promotion of B&R bonds, accumulate and consolidate experience gained from pilot projects, refine and improve relevant rules and supporting measures, steadily build its advantage in terms of the scale of B&R bond financing, improve the capacity of stock exchange bond market for B&R development, and support the creation of a new pattern for comprehensively opening up the capital market to the outside world.
At the same time, with the continuous opening of the stock exchange bond market, B&R bonds are expected to grow in both supply and demand in the future.
In terms of potential supply, the scale of B&R bonds is expected to grow steadily due to increasing financial demands of B&R projects, said Jiang, adding thatin terms of market demand, as the policy support for B&R bonds is strong and most domestic issuers are central enterprises and outstanding private enterprises, the risk of issuance is low and the market demand for B&R bonds is expected to grow robustly.