China Overseas Land Offers Dollar Debt as Beijing Pushes GrowthRachel Evans
China Overseas Land & Investment Ltd., the largest-listed mainland developer in Hong Kong, is marketing dollar-denominated bonds as the government balances the need to maintain economic growth amid soaring house prices.
China Overseas Land plans to sell five-, 10- and 30-year bonds as soon as today, a person familiar with the matter said, asking not to be identified because the terms aren’t set. Evergrande Real Estate Group Ltd., the nation’s third-largest Hong Kong-listed developer, is also marketing notes in the U.S. currency, as is India’s HDFC Bank Ltd., separate people said.
Beijing is striving to bolster growth that economists predict will slump to 7.6 percent this year, while reining in home prices that last month jumped the most since January 2011 in China’s four major cities. Developers from the world’s second-largest economy have sold $1.25 billion of bonds this month, more than a fifth of total issuance from China and Hong Kong, data compiled by Bloomberg show.
“As we expect the government to be supportive of the economy, we do not see many signs that it will implement massive new tightening measures,” said Agnes Wong, a Hong Kong-based analyst at Nomura Holdings Inc. “Chinese developers have been aggressive in acquiring land and some need money for refinancing, so we believe the supply of property bonds should continue for a while before Christmas.”
New home prices in September rose 20 percent in the southern business hubs of Shenzhen and Guangzhou, 17 percent in Shanghai and 16 percent in Beijing from a year earlier, the National Bureau of Statistics said in a statement yesterday. Prices climbed in 69 of the 70 cities the government tracks.
China Overseas Land is marketing five-year notes at about 240 basis points more than similar-maturity Treasuries, 10-year securities at about 325 basis points more than government debt and 30-year bonds at a 310 basis-point spread, according to a person with knowledge of the matter. Evergrande, based in Guangzhou, capital of Guangdong province, plans to sell five-year bonds at about 9 percent, a separate person said.
HDFC Bank is marketing notes due November 2016 at about 280 basis points more than three-year Treasuries, a person with knowledge of the details said. South Korea’s Hana Bank meanwhile plans to meet investors in Asia, Europe and the U.S. next week, another person said.
U.S. employers hired fewer-than-estimated people in September, a report showed yesterday, spurring speculation that the Federal Reserve will need to delay any reduction of bond purchases. Tapering could be delayed until the second quarter of 2014, Robert Carnell, ING Bank NV chief international economist said in a note to clients. Bill Gross, the founder of Pacific Investment Management Co., said the Fed is unlikely to slow stimulus “anytime soon,” in a radio interview on “Bloomberg Surveillance” with Tom Keene and Mike McKee.
The cost of insuring corporate and sovereign bonds in the Asia-Pacific region against non-payment fell, according to traders of credit-default swaps.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 3 basis points to 132 basis points as of 7:56 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set to decline 24.4 basis points from Sept. 30, according to data provider CMA.
The Markit iTraxx Australia index retreated 2 basis points to 103.5 as of 10:56 a.m. in Sydney, according to ANZ prices. The benchmark is poised for its lowest close since Sept. 19, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Japan index fell 2 basis points to 83.75 basis points as of 8:54 a.m. in Tokyo, according to Citigroup Inc. prices. The measure, which has ranged from 77.3 to 110.2 this half, is on track for a 13.6-basis-point decline this month, the most since April, according to CMA.
Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.
The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.