Central Huijin Investment Ltd., a subsidiary of China’s sovereign wealth fund, has issued bonds that have propelled its total local debt sales to a historic high this year. The firm has sold 207 billion yuan (approximately $29 billion) in notes in 2024, marking the highest volume since its entry into the onshore credit market in 2010. The latest bond issuance includes 9 billion yuan in three-year debt securities and 15 billion yuan in five-year bonds, according to sources familiar with the matter.
In the past month, China’s onshore equity market has experienced a rally, benefiting from new stimulus measures that have positioned it as one of the world’s top-performing markets, achieving a 23% gain despite recent pullbacks. Historically, during previous downturns over the past year, Central Huijin had intervened by purchasing exchange-traded funds to stabilize the market.
Given the low financing costs in the domestic credit market and the attractive valuations of stocks, investors like Huijin may reinvest the proceeds from debt issuance into equity assets, noted Wei Liang Chang, a strategist at DBS Bank Ltd.
The documentation for Huijin’s bond offerings indicates that the proceeds from the latest bond sales will be utilized to optimize its debt structure, replenish working capital, or for other purposes as approved by regulatory authorities.
Central Huijin’s parent organization, China Investment Corp., chose not to comment on the recent debt issuance, stating that the fund currently has no outstanding bonds.
According to its semi-annual report, Huijin’s trading assets—referring to securities intended for resale at a profit—soared by 388%, reaching 581.8 billion yuan in the first half of this year.
“Continued state-led purchases of Chinese stocks could help sustain the recovery in risk sentiment,” Chang suggested.
These trading strategies are likely to be profitable, as the average coupon rate for Huijin’s yuan-denominated bonds this year stands at approximately 2.2%, the lowest recorded to date. Additionally, the CSI 300 index, a key benchmark for Chinese stocks, has surged about 15% this year.
Last week, the People’s Bank of China introduced a swap facility that enables institutional investors to access liquidity from the central bank to buy stocks. The program has already garnered applications totaling over 200 billion yuan, according to the PBOC.
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