APEC Finance Ministerial Meeting Offers Hong Kong Chance to Attract Sovereign Borrowers

This week’s Apec Finance Ministerial Meeting is giving Hong Kong an opportunity to demonstrate the depth and advantages of its financial markets to sovereign debt issuers. Analysts see the meeting as a chance to highlight the city’s markets and attract more Asia-Pacific sovereign borrowers.

Dim sum bonds offer an alternative

Hong Kong’s signature dim sum bond market could strengthen its appeal by offering sovereign issuers relatively low fundraising costs compared with developed markets. Analysts also point to risk diversification as another reason the market could attract sovereign borrowers, including members of the Asia-Pacific organisation.

The push comes as higher borrowing costs in the United States make alternative-currency financing more attractive to some issuers. “Elevated US interest rates have increased the cost of dollar borrowing, making issuance in alternative currencies, including offshore renminbi, more attractive for many issuers, such as sovereign governments,” said Marcus Yin, assistant vice-president of the sovereign risk group at Moody’s, a credit rating agency.

A wider role for Hong Kong

For Hong Kong, the opportunity lies in using the Apec meeting to show potential issuers the advantages of its financial markets. The city’s dim sum bond market, lower fundraising costs relative to developed markets and diversification benefits together form the basis of its appeal to sovereign borrowers. The focus on offshore renminbi issuance also reflects how changes in dollar borrowing costs are influencing financing choices among sovereign governments.

Source: South China Morning Post