Panda bond issue opens China market to Philippines firms

MANILA, Philippines — The country’s first Panda bond issuance has opened the doors for private companies to tap the Chinese market, British banking giant Standard Chartered Bank said.

Stanchart CEO Lynette Ortiz said the landmark transaction, which raised 1.46 billion renminbi or nearly P12 billion for the government, “established the Philippines as a high profile and sophisticated issuer with access to multiple funding sources.”

“The government’s successful issue now opens the door for the private sector to access the onshore Chinese bond market for financing,” Ortiz said.

Stanchart is among the few foreign banks that have received lead underwriting license for non-financial corporate Panda bonds from the National Association of Financial Market Institutional Investors earlier this year.

“Standard Chartered Bank is pleased to be part of this inaugural issuance and the government can look forward to our continued support,” she said.

The Philippines’ maiden issue of Panda bonds affirms the country’s improving bilateral relations with China and the increasing relevance of the renminbi.

In 2016, the International Monetary Fund (IMF) included the renminbi in the special drawing rights’ (SDR) basket of currencies.

Chinese and other offshore investors swarmed the renminbi-denominated bond offering of the Philippine government with oversubscription hitting about 6.32 times, the all-time largest coverage for any panda sovereign issuer.

Bids reached 9.22 billion renminbi compared with the Philippine government’s debt offering of 1.46 billion renminbi.

The Philippines emerged as the first ASEAN sovereign to issue Panda bonds, and was able to diversify its investor base with participation originating from both onshore and offshore investors.

With the bond connect scheme, offshore investors comprised 87.7 percent of allocation, representing the highest offshore mix for any Panda issuer.

With a tight spread of 35 basis points above benchmark, the three-year Panda bonds fetched a coupon rate of five percent, a reflection of confidence in the robust growth prospects and creditworthiness of the Philippines.

Price range was announced on March 19 at five to 5.6 percent. Overwhelming demand was able to push the coupon to its lower bound of five percent.

Relative to the government’s usual global dollar issuance, the renminbi-denominated panda bond coupon would have an indicative dollar swap equivalent rate of 2.93 percent, 23 basis points below the current three-year dollar yield of 3.16 percent.