(Yicai Global) Jan. 2 -- Chinese companies' dollar debt suance continued to surge last year, Bloomberg data show.>
Chinese firms sued 2,157 dollar-denominated bonds last year, raing USD313.9 billion, with the number of suances and the amount raed increasing annually by respective factors of 2.43 and 6.23.
Increases in interest rates on the domestic bond market pushed companies to explore financing alternatives, industry experts said. The stability of the yuan exchange rate and the complementarity of domestic and offshore markets also fueled Chinese companies' suance of dollar debt, they said.
Chinese firms have a lot of room for dollar debt as the yuan internationalizes and China's capital markets align with global standards, they added.
The average rate of Chinese companies' US dollar bonds was around 3.1 percent at suance. Interest rates for industries such as exploration and production, public facilities, food and beverage, property and accident insurance ranged between 3 percent and 4 percent at suance.
Issuance interest rates for the banking, securities, exploration and mining industries offshore were lower than those onshore, while rates for the insurance, real estate and coal industries were higher offshore than those onshore. Offshore debt suance still has cost advantages for investment-grade firms, said Zhang Yu, chief of macro and fixed income at Minsheng Securities.
Demand for 30-year bonds with secondary market liquidity exts among offshore investors. Many large state-owned enterpres such as State Grid Corporation of China have sued 30-year dollar bonds.
Alibaba Group Holding Ltd. [NYSE:BABA] completed a one-time five-year, 10-year, 20-year, 30-year and 40-year bond suance in November, said Ivan Chung, head of Moody's China Credit Research and Analys.
"Some may be worried that if the US further hikes base interest rates in 2018, offshore financing of Chinese companies will be reduced," Chung said, adding that short-term exchange and interest rates will motivate Chinese groups to sue bonds in the dollar market.
Chinese rating agencies made major layouts in overseas markets in the past two years. Some suers are considering using domestic rating agency services for offshore bonds suance. Many companies will likely choose to sue bonds rated by both international agencies and domestic ones.
China Chengxin International Credit Rating Co., Shanghai Brilliance Credit Rating & Investors Service Co., United Credit Ratings Co. and Colden Credit Rating International Co. have put money into th area. Many real estate and city investment groups have chosen Chinese rating agencies in the process of suing dollar debt.