PH eyes return to ‘panda’ bond market

The Philippines is looking at again borrowing in China through the sale of renminbi-denominated panda bonds following the success of its maiden sale last month, the head of the Duterte administration’s economic team said.

Finance Secretary Carlos G. Dominguez III said that another panda bonds offering was “most likely.”

Quoting a report of Thomson Reuters’ IFR Asia publication, Dominguez noted that the final pricing of 5 percent was a tight spread of 35 basis points over the benchmark three-year notes of China Development Bank at 4.65 percent.

“Of the five sovereign panda bond issuers so far, only South Korea has priced at a tighter spread over CDB. Less than two months ago, the government of the Emirate of Sharjah offered a 103-bp premium over CDB for its two-billion renminbi three-year panda at 5.8 percent. The other two sovereign issuers, Poland and Hungary, paid 60 bp and 83 bp over CDB, respectively,” the IFR Asia report noted.

In March, the Philippines sold 1.46 billion renminbi or almost P12 billion in three-year panda bonds amid strong demand.

The country’s first panda bond issuance generated 9.22 billion renminbi in bids or 6.32 times bigger than the approved issue size.

Dominguez had noted that the achieved coverage ratio was the largest all-time among any sovereign panda issuance.

“With substantial demand, we were able to push coupon to the lower end of the price target of 5-5.6 percent,” according to Dominguez.

The Philippines was not only the first Asean country to sell the renminbi-denominated IOUs, but also was able to diversify its investor base with participation originating from both onshore and offshore investors, the government’s Investor Relations Office had said.

“With the bond connect scheme, offshore investors comprised 87.7 percent of allocation, representing the highest offshore mix for any panda issuer,” according to the IRO.

For Dominguez, the Philippine government’s successful inaugural issuance of panda bonds highlighted the investor confidence that the country enjoyed on the back of its strong credit profile.

“The Duterte administration is committed to sustaining the growth momentum and making the economy a more inclusive one by way of massive investments in infrastructure and human capital development. It intends to pursue this unprecedented level of public spending while maintaining sound economic policies and observing fiscal discipline. This is also one of the concrete results of President Duterte’s independent foreign policy,” the Finance chief had said. —BEN O. DE VERA