As the coupon of the bonds is set at 3 percent - much higher than the typical 0.8 percent rate offered by local banks on yuan deposits - the response is expected to be robust. The retail order book will be closed on July 6.
Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong said after the launch ceremony Tuesday that the second issuance of yuan bonds may come soon.
"The management arrangement for issuing yuan bonds in Hong Kong by mainland financial institutions is already in place. There is actually nothing to stop them from coming," Yam told reporters.
The Export-Import Bank of China, a fully government-owned policy bank under the direct leadership of the State Council, is believed to be the second mainland financial institution preparing to issue yuan bonds in Hong Kong. The bank said earlier its board had approved the issuance, and will proceed with the sale here after obtaining approval from the People's Bank of China.
China Development Bank's two- year yuan bonds were capped at a total size of 5 billion yuan (HK$5.12 billion). The offer will be available for both institutional and individual investors, with a minimum of 1 billion yuan worth already set aside for retail subscriptions.
"If there is demand, the retail portion may increase further," China Development Bank governor Chen Yuan said. "The funds raised from this bond issue in Hong Kong will be used to finance China's fundamental key infrastructure projects."
ICBC (Asia) executive director Stanley Wong Yuen-fai said: "The bond issue aims to attract the 25.5 billion yuan deposits in local banks." Since this is the first yuan bond issue, retail investors will hopefully be given priority, Wong added.
Bank of China (Hong Kong) (2388) chief executive He Guangbei said if the response is overwhelming, it may be hard to match each subscription with one lot. In that case, the allotment will take the form of a lucky draw.
"The issuance of yuan bonds in Hong Kong will broaden the scope of yuan assets of Hong Kong banks and add a new investment tool to Hong Kong's financial market," said People's Bank of China assistant governor Ma Delun. "It also offers a new channel for yuan to flow back to the mainland."
Financial Secretary Henry Tang Ying-yen said the successful issuance of the first lot of yuan bonds in the city is turning a new page for Hong Kong.
"This is a very significant milestone for Hong Kong being the country's international financial center," Tang said.
"It signifies further consolidation and development of the complementarity, as well as cooperation between Hong Kong and the mainland."
Development of the yuan business will continue to proceed gradually.
Yam said the the yuan bond market may not be very active in the early stages. But if there are transactions in yuan bonds between local banks, market activity will heat up.
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