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China Construction Bank to Sell Mortgage-Backed Notes
By Luo Jun
Dec. 5 (Bloomberg) -- China Construction Bank Corp., the nation's largest mortgage lender, plans to raise 4 billion yuan ($541 million) selling residential mortgage-based securities, the second such sale in the country.
The notes will be sold to institutional investors on the nation's interbank bond market between Dec. 11 and 14, the Beijing-based bank said in a statement yesterday. The securities will be divided into three portions and carry domestic ratings of BBB to AAA. Yields will be based on investors' open bids.
Construction Bank and China Development Bank, a state-owned lender that funds public works products, were chosen in 2005 by the government for a pilot program to sell asset-backed bonds, not previously issued in China. The government is seeking to develop the nation's bond market to give companies more options for borrowing and help banks manage risk.
``These securities are considered risky assets by most banks, so investors will be very selective and cautious in loading too much on their books,'' said Dong Dezhi, a bond analyst at Bank of China in Shanghai.
Returns aren't expected to be attractive because of the country's rising interest rate environment, he said. China Development Bank, the nation's biggest bond seller after the Ministry of Finance, scrapped an 8.1 billion yuan sale of asset- backed bonds in June after failing to attract enough interest.
Rising Rates
The central bank has pushed the key one-year lending rate to a nine-year high of 7.29 percent. More increases may be coming to damp lending growth and control inflation.
Construction Bank raised 3 billion yuan in the nation's first mortgage-backed securities sale two years ago. The securities are bonds based on underlying pools of debt such as company loans or mortgages. The risk ratings on the current bonds range from highest, AAA, to fourth highest, BBB.
Established in 1954 to fund roads, bridges, dams and other infrastructure, Construction Bank is now the country's largest mortgage and real-estate lender. It provides 23 percent of the nation's mortgages and about 12 percent of overall loans.
The Chinese government, which recapitalized banks by spending 3.5 trillion yuan, equivalent to a fifth of the nation's 2005 gross domestic product, wants financial companies to develop ways of raising their own capital.
Fuzhou-based Industrial Bank Co., part-owned by Hong Kong's Hang Seng Bank Co., announced today it will raise 5.24 billion yuan selling asset-backed securities on the interbank market from Dec. 13 to 17, according to a statement.
Industrial & Commercial Bank of China Ltd., the nation's largest bank by assets, sold 4.02 billion yuan of asset-backed securities in September. Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup Inc., sold 4.4 billion yuan of similar bonds in August.
China Citic Bank Co. and China Merchants Bank Co. have also submitted plans to sell asset-backed debt to the China Banking Regulatory Commission, according to Standard Chartered Plc, the arranger of the sales.
China Construction Bank to Sell Mortgage-Backed Notes
By Luo Jun
Dec. 5 (Bloomberg) -- China Construction Bank Corp., the nation's largest mortgage lender, plans to raise 4 billion yuan ($541 million) selling residential mortgage-based securities, the second such sale in the country.
The notes will be sold to institutional investors on the nation's interbank bond market between Dec. 11 and 14, the Beijing-based bank said in a statement yesterday. The securities will be divided into three portions and carry domestic ratings of BBB to AAA. Yields will be based on investors' open bids.
Construction Bank and China Development Bank, a state-owned lender that funds public works products, were chosen in 2005 by the government for a pilot program to sell asset-backed bonds, not previously issued in China. The government is seeking to develop the nation's bond market to give companies more options for borrowing and help banks manage risk.
``These securities are considered risky assets by most banks, so investors will be very selective and cautious in loading too much on their books,'' said Dong Dezhi, a bond analyst at Bank of China in Shanghai.
Returns aren't expected to be attractive because of the country's rising interest rate environment, he said. China Development Bank, the nation's biggest bond seller after the Ministry of Finance, scrapped an 8.1 billion yuan sale of asset- backed bonds in June after failing to attract enough interest.
Rising Rates
The central bank has pushed the key one-year lending rate to a nine-year high of 7.29 percent. More increases may be coming to damp lending growth and control inflation.
Construction Bank raised 3 billion yuan in the nation's first mortgage-backed securities sale two years ago. The securities are bonds based on underlying pools of debt such as company loans or mortgages. The risk ratings on the current bonds range from highest, AAA, to fourth highest, BBB.
Established in 1954 to fund roads, bridges, dams and other infrastructure, Construction Bank is now the country's largest mortgage and real-estate lender. It provides 23 percent of the nation's mortgages and about 12 percent of overall loans.
The Chinese government, which recapitalized banks by spending 3.5 trillion yuan, equivalent to a fifth of the nation's 2005 gross domestic product, wants financial companies to develop ways of raising their own capital.
Fuzhou-based Industrial Bank Co., part-owned by Hong Kong's Hang Seng Bank Co., announced today it will raise 5.24 billion yuan selling asset-backed securities on the interbank market from Dec. 13 to 17, according to a statement.
Industrial & Commercial Bank of China Ltd., the nation's largest bank by assets, sold 4.02 billion yuan of asset-backed securities in September. Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup Inc., sold 4.4 billion yuan of similar bonds in August.
China Citic Bank Co. and China Merchants Bank Co. have also submitted plans to sell asset-backed debt to the China Banking Regulatory Commission, according to Standard Chartered Plc, the arranger of the sales.
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