SAFE Investments Said to Issue CNY54bn Bonds Soon

China SAFE Investments Ltd., a wholly-owned subsidiary of the USD 200 billion Chinese sovereign wealth fund China Investment Corp. (CIC), plans to issue not more than CNY 54 billion renminbi bonds on the inter-bank bond market on August 24, said sources.

Of the total, CNY 26 billion will be seven-year ones with fixed yields and CNY 28 billion will be 20-year ones with fixed yields, with an option of CNY 6 billion and CNY 8 billion, each. And the notification for related bidding will be released on August 19.

Previous sources said that the state-owned investor planned to issue a total of CNY 190 billion renminbi bonds on the market in several phases in a bid to finance enough capital to inject into some domestic commercial lenders and the lead undertakes would include Agricultural Bank of China (ABC, SEHK: 1288 and SHSE: 601288), China Development Bank (CDB), China International Capital Corp. (CICC), and China Galaxy Securities Co., Ltd.

The issuing size was finalized at CNY 88 billion first as it intended to infuse capital into the Export-Import Bank of China and China Export & Credit Insurance Corp. only. But considering the financing plans of Industrial and Commercial Bank of China (ICBC, SHSE: 601398, and SEHK: 1398), Bank of China (BoC, SEHK: 3988 and SHSE: 601988), and China Construction Bank (CCB, SHSE: 601939, and SEHK: 0939), it expanded the issuing size to CNY 190 billion finally.

So far, all of the three banks have finalized their financing plans, expecting to raise at most CNY 45 billion, CNY 60 billion and CNY 75 billion from a share delivery, respectively. The stake SAFE Investments controlled in them stood at 35.4 percent, 67.53 percent and 57.09 percent as at the end of March 31, 2010 and provided that it dose not want the stake to be diluted, it needs to inject CNY 15.9 billion, CNY 40.5 billion and CNY 42.8 billion into the three, respectively.

Currently, what the market worry about much is that who will acquire the bonds. On the Chinese inter-bank bond market, large state commercial banks including ICBC, BoC, CCB and ABC are major buyers of long-term bonds after the nation's insurers. However, SAFE Investments acts as the biggest shareholder of ICBC, BoC, CCB, ABC, and China Everbright Bank (SHSE: 601818), currently.

"They should be allowed to buy the bonds but there will be a limit," said an industry observer. "Notably, it will be a tough job for the market to consume so many bonds within a short period of time without the participation of those banking giants."