CHALIECO plans bonds as yield premiums drop to month¡¯s low

China Aluminum International Engineering Corp. (CHALIECO) is planning to sale dollar perpetual bonds as the interest premium investors demand for U.S. currency debt in Asia drops to minimum within a month.

CHALIECO, a unit of CHINALCO has engaged Morgan Stanley and CLSA for the task who will arrange a series of meetings in Singapore and Hong Kong for fixed-income investors, a source said.

Chinese companies are venturing into dollar bond market as onshore interest rate remains high, averaging 6.18 percent this year compared with 5.10 percent during the whole year 2013, according to a data collected by Bloomberg.

According to Mark Reade, a Hong Kong-based analyst at Mizuho Securities Asia Ltd said, “Any improvement in onshore liquidity is beneficial for China’s U.S. dollar spreads because it reduces Chinese corporates’ reliance on offshore bonds markets.”

According to a Bloomberg data a record 56 percent of Asian offerings were sold by Chinese and Hong Kong-based borrowers in dollars last year. According to HSBC Holdings Plc index dollar spreads for Chinese companies fell to 301.96 points, the lowest since Jan. 23. Premiums for dollar bonds in Asia averaged at the minimum with 284.42 basis points.

Credit-default swap indexes are the benchmarks for protecting bonds against default. Traders use these indexes to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.

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