First, there was the dim sum bond, which are bonds denominated in renminbi and issued in Hong Kong. Now comes what may be termed as dim sum stocks, which are equities denominated in the yuan and listed on the Hong Kong stock exchange.
Hong Kong's First Yuan-Denominated IPO Is Launched
Yet another funding avenue has been opened to CFOs in Asia, especially those in Hong Kong and China. The first renminbi-denominated initial public offering in Hong Kong has just been launched, and it is expected to raise up to RMB11.2 billion (US$1.7 billion).
The issuer is Hui Xian Real Estate Investment Trust (REIT), which counts Hong Kong’s richest man, Li Ka-shing, as major shareholder. Hui Xian’s major asset is the 10,000-square metre Oriental Plaza, a commercial complex near Tiananmen Square and the Great Hall of the People in Beijing.
Oriental Plaza was built by Li’s Cheung Kong Holdings, which also owns 30% of Hui Xian Asset Management, the manager of Hui Xian REIT. It hosts the five-star Grand Hyatt Bejing, 613 luxury apartments, eight Grade A office buildings and a three-level shopping mall.
Like dim sum bonds, renminbi-denominated IPOs in Hong Kong seek to tap some RMB407 billion (US$62 billion) in bank deposits in Hong Kong. Investors and companies have been piling into the renminbi in part on speculation that the Chinese currency will continue strengthening against the U.S. dollar and the Hong Kong dollar, which is pegged to the greenback.
Hong Kong investors have been queueing up to subscribe to dim sum bonds, which have a higher yield than bank deposits. The Hui Xian REIT is expected to be heavily oversubscribed, particularly by retail investors.
For companies, the proceeds of a renminbi debt or equity offering in Hong Kong will need to be invested in mainland China because the renminbi is not convertible on the capital account. Permission is required to transport the money raised in Hong Kong over the border to China.