Bloomberg News

HSBC, Citi Said to Apply to Underwrite Yuan Bonds in China

June 15, 2011

(Updates with size of interbank market in fourth paragraph.)

June 15 (Bloomberg) -- HSBC Holdings Plc and Citigroup Inc. are among several foreign banks that have applied to underwrite a wider range of yuan-denominated corporate bonds in China, a person familiar with the situation said.

No time frame has been set for approval of the applications, said the person, who asked not to be identified as he wasn’t authorized to speak to media. He declined to identify the other banks that have applied.

The Wall Street Journal reported the applications by HSBC and Citi earlier today.

Winning the licenses would give HSBC and Citi greater access to China’s interbank market that’s 60-times larger than the exchange market where foreign companies including UBS Securities Co. and Goldman Sachs Gao Hua Securities Co. already underwrite bonds. The interbank market had 18.91 trillion yuan ($2.9 trillion) of outstanding bonds at the end of April compared with 305.3 billion yuan for the exchange market, according to Chinabond, the bond clearing house.

Stephen Thomas, a Shanghai-based spokesman for Citigroup, declined to comment on what he called “speculation.” Anthony Lin, a Shanghai-based spokesman for HSBC, said he couldn’t immediately comment.

HSBC Bank (China) Co. helped underwrite 5 billion yuan of bonds for Bank of Shanghai, it said in November 2009. UBS Securities has underwritten 17.81 billion yuan of bonds in China so far this year, according to Bloomberg data, making it the top foreign underwriter. Goldman Sachs Gao Hua Securities has helped underwrite 7.1 billion yuan, the data show.

Debt Sales

The National Association of Financial Market Institutional Investors, regulator of China’s interbank bond market, said in August that it may allow foreign banks to underwrite a wider range of debt. The regulator is overseen by China’s central bank.

Such licenses would allow the foreign banks to underwrite the sale of non-financial corporate bonds on China’s interbank market, including commercial paper and medium-term notes.

Commercial paper and medium-term notes sold on the interbank market and regulated by the central bank totaled 484.8 billion yuan by the end of April, according to Chinabond. Sales of corporate bonds overseen by other regulators totaled 115 billion yuan in the same period, according to the clearing house.

--Henry Sanderson. With assistance by Stephanie Wong in Shanghai and Zhang Dingmin in Beijing. Editors: John Liu, Chua Kong Ho

To contact the Bloomberg staff on this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith11@bloomberg.net


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