China National Materials bond pitch an HK 1st
Updated: 2009-07-28 07:20
By Joey Kwok(HK Edition)
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HONG KONG: China National Materials Company (MNMC), the state-owned producer of cement-making equipment, said yesterday that it will issue up to 2.5 billion yuan of corporate bonds, making it the first Hong Kong-listed mainland company to sell bonds on the mainland.
The cement equipment and construction company, also known as Sinoma, said it has received approval from the securities regulator on the mainland for issuing the seven-year bonds from July 29 to July 31.
The corporate bonds, with an indicative coupon between 4.9 percent and 5.4 percent, will comprise an institutional tranche of 90 percent of the issue and 10 percent of the retail tranche, the company said in its statement filed to the Hong Kong and Shanghai stock exchanges.
BOC International (China) will be the lead underwriter, while MNMC's parent company China National Materials Group Corporation will be the guarantor. Pengyuan Credit Rating Company has given an AA- rating to Sinoma and its corporate bonds.
Moving in line with the 1.35 percent jump in the benchmark Hang Seng Index yesterday, shares in Sinoma finished up 1.17 percent or HK$0.08, at HK$6.94.
To invigorate the country's bond market, the mainland authorities are implementing initiatives to expand corporate bond issuance and diversify the types of issuers.
The move can also divert credit risks from banks, the traditional lenders to mainland companies and to other investors including insurers, securities houses and retail investors.
Analysts said more Hong Kong-listed mainland companies may issue corporate bonds in the mainland capital market, as the H-share companies usually need large sums of yuan for their mainland operation.
"The renminbi is the major currency in Sinoma's operations; the issuance of corporate bonds will provide extra yuan capital to the company," said Castor Pang, chief strategist at Sun Hung Kai Financial.
Pang added that more Hong Kong-listed mainland companies may seize the opportunity to issue corporate bonds on the mainland, as more fresh capital has been flowing into the mainland market.
He also expects Sinoma to report satisfactory earnings this year.
"Sinoma has been showing good earnings in previous years," he said, "It may also run a better business in the second half, benefiting from the central government's support of construction development."
Echoing Pang's sentiments, the head of equity at Delta Asia Financial, Conita Hung, said the issuance of corporate bonds will provide direct yuan capital to Sinoma and lower the short-term liquidity pressure of the company.
"The issuance of corporate bonds is only one of the channels in which to raise funds,apart from banks," Hung said, "Issuing on the mainland may sound more beneficial to Sinoma than in Hong Kong."
She expects the new listing of cement supplier BBMG may give a boost to Sinoma's shares, which have been consolidated for a period of time.
(HK Edition 07/28/2009 page4)