Bond market sees surge in offerings

Chinese companies placed a combined total of 185.4 billion yuan ($29.67 billion) in bonds on the mainland's two exchanges in the first 10 months, up 81 percent year-on-year and nearly double the amount raised via new shares issued over the same period, according to data released Sunday from the financial data provider iFind, a development which experts say points to changing conditions in the domestic capital market.

The quick growth in corporate debt securities has been driven in large part by the convenience and low financing costs associated with issuing bonds as well as tightening regulatory oversight on initial public offerings (IPOs), experts told the Global Times.

Since the start of this year, the China Securities Regulatory Commission (CSRC) has rolled out a string of policies to facilitate bond sales - including simplifying the bond application process, paving the way for a wider diversity of debt products and allowing low-credit firms to extend bonds - all of which have made local companies more inclined to tap the bond market for financing, Guo Yong, an analyst from GF Securities, told the Global Times.

The mainland's two stock exchanges also started a trial program allowing domestic non-listed small and medium-sized enterprises (SMEs) to sell bonds through private placement on May 22.

"The low cost of issuing bonds has formed a major force as well behind the acceleration in bond sales in the domestic market," Guo said.

The People's Bank of China cut reserve requirement ratios three times in the first half of this year by a total of 1.25 percent, a move which has left a large amount of liquidity floating around in the capital market and thus pulled down bond yields, Guo explained.

Yields on fixed rate debt products, such as treasury bonds, dropped by 0.24 percent over the first six month; while corporate bonds dropped 0.83 percent over the same period, according to figures from China Government Securities Depository Trust & Clearing Co Ltd.

Companies have also become more amenable to entering the debt market as the CSRC holds back on new IPO approvals amid concerns about the stock markets' shrinking capital pool, Zhang Xin, an analyst from Guotai Junan Securities, told the Global Times.

From July to September, the mainland stock markets saw a total of 43 new listings which together pulled in a total of 26.79 billion yuan in funding, both record lows since regulators resumed IPO examinations in 2009, according to data from the CSRC.

Meanwhile, many enterprises which have received the regulator's nod to list have also been required to reduce their fundraising targets, Zhang said.

For example, China Communications Construction Company Limited, a transportation infrastructure builder, downsized its market financing goal by over 75 percent earlier this year before getting the green light on its equity fundraising plan.