Kaisa Group Holdings Ltd., a property developer in China’s Pearl River Delta, is considering selling yuan-denominated bonds to Hong Kong investors seeking to profit from a stronger Chinese currency.
“We would love to do one if we can,” Vice Chairman Lai Ling Tam said at the FinanceAsia Asia-Pacific Debt Investor Forum in Hong Kong today. “It’s a natural hedge for us because our revenue is in renminbi.”
Kaisa predicts interest from investors in the city in bonds in yuan, also known as the renminbi, because of the potential for currency appreciation. China loosened its currency peg to the dollar on June 19 when the People’s Bank of China said it will increase “flexibility” of the currency.
Bonds denominated in yuan and sold outside of China have been rare. Hopewell Highway Infrastructure Ltd. is marketing a sale of yuan debt that would be the first in the city in the Chinese currency by a non-financial company.
The operator of expressways in the Pearl River Delta plans to sell the debt with a coupon of about 3 percent, a person familiar with the matter said on July 6.
“In Hong Kong you will probably see more renminbi issues coming to the market,” Tam said.
Kaisa raised $350 million from a sale of 13.5 percent bonds in April, according to data compiled by Bloomberg. The five-year notes have dropped to 91.75 cents on the dollar, to yield 16.01 percent today, according to ING Groep NV prices on Bloomberg.
China, the world’s third-largest economy, wants to promote the yuan beyond its borders and increase its use in trade. The use of yuan for cross-border trade settlement has been expanded to 20 provinces and cities, the People’s Bank of China said on June 22.
Chinese authorities had prevented the currency from strengthening against the dollar since July 2008 to help the country’s exporters cope with the credit crisis. Officials are seeking to let the yuan strengthen gradually to deflect criticism from its trading partners and curb inflation, while protecting a recovery in exports.