Crédit Agricole is asserting itself on the Hong Kong markets: it makes a positive contribution to the development of financial market infrastructures and increasingly supports clients in mainland China in their financing and hedging needs abroad.
“Our mission here in Asia is to be the benchmark bank and expert in managing cross-border financing, structuring and derivatives trading between China and the rest of the world – and Hong Kong is the place. ideal for that, ”says John Luk, Head of Emerging Markets in Hong Kong.
Over the past few years, Crédit Agricole has done a lot of work to develop its bond business in Hong Kong, and is today one of the leading arrangers of both the Hong Kong dollar and the offshore Chinese renminbi (CNH) emissions. During the first five months of the year, Crédit Agricole organized we$ 2.3 billion in Hong Kong dollar debt and another we$ 3.6 billion in CNH debt, according to Bloomberg data.
Our mission here in Asia is to be the bank of reference and the expert to lead cross-border financing, structuring and derivatives trading between China and the rest of the world – and Hong Kong is the place for that. .
John Luk, Credit Agricole
Crédit Agricole is one of five non-Asian banks designated as primary dealer for the Hong Kong government bond initiative. The bank is also a market maker for the notes and notes of the Hong Kong Exchange Fund (EFBN) debt issuance program, which provides liquidity to the local fixed income market.
“These things are important because many issuers and investors look at the bank’s infrastructure and determine if they have the bond distribution capacity,” Luk explains.
“So when they see that Crédit Agricole is one of the few foreign banks to be a primary dealer for Hong Kong government bonds, EFBNs, they trust us to provide the service to them.
Another important way Credit Agricole has supported the local market is to promote acceptance of alternative risk-free rates in Hong Kong as the world prepares to abandon Libor.
In May, Crédit Agricole completed the first transaction USD/CNH currency swap using the guaranteed overnight funding rate (SOFR), which should replace we Libor dollar. The weOne-year $ 20 million trade, which was made on behalf of an undisclosed Chinese financial institution, allows the client to receive a compound sum SOFR on the float USD leg and pay a fixed rate of 2.43% on the CNY leg.
We are working hard to make the first SOFR market transactions to facilitate the transition away from Libor
Wing Cheung, Credit Agricole
“We are working hard to make the first SOFR in the market to facilitate the transition out of Libor, ”explains Wing Cheung, head of product structuring and development for Asia.
“That way we can set a benchmark for clients that they can use when discussing with their management how to prepare for the Libor shutdown. “
These groundbreaking transactions feed into the regular conversations Crédit Agricole has with its clients about switching to Libor, explains Cheung.
Another area in which the French bank makes a valuable contribution is that of the environment, social and governance.
For two years, Crédit Agricole has actively participated in the global Hong Kong medium-term note program dedicated to green bond issues. He also provided support to a number of institutions – including the Asian Infrastructure Investment Bank – in designing their frameworks for sustainable development in the region.
In October last year, Crédit Agricole worked as senior arranger on the very first green derivatives transaction on the Hong Kong dollar. It was a green interest rate swap with a notional value of Hong Kong$ 400 million (we$ 51 million), which was entered into as part of a financing deal for Australian logistics company Goodman. The company wanted to include a feature in the exchange that would offer a preferential discount coupon provided certain pre-defined green criteria were met.
In this case, to get the preferential coupon, Goodman would need to hold at least one silver certificate from the we Green Building Council in “Leadership in Energy and Environment Design” and a Gold Certificate in “Building Environment Assessment Method” from Hong Kong.
“As this deal was the first of its kind, the challenge was to properly define all the criteria and modalities and work out with the Hong Kong agencies what the green criteria should be,” Luk explains.
“This agreement should pave the way for similar transactions.”
Financing and corporate coverage
Crédit Agricole’s commitment to the Hong Kong market and its strong presence on the mainland has enabled the bank to connect the onshore and offshore renminbi markets in a way highly valued by clients, especially Chinese companies who were looking for cheap hedges and financing transactions in fairly volatile markets.
“Many Chinese exporters have we receivables in dollars that they have to convert back into renminbi, ”explains Cheung.
“While they could just do a simple currency forward, we provide them with clear value in the structured solutions they offer, which reduces hedging costs and allows them to focus on managing their core business. , rather than wondering if they are buying CNH Where CNY at the best possible price.
Since 2020, Crédit Agricole has provided more than we$ 6 billion USD/RMB bespoke structured term hedging solutions for Chinese companies struggling to negotiate the choppy waters of Covid-19.
As a European bank, Crédit Agricole has been particularly successful in helping Chinese customers access cheap euro financing and benefit from the broadening of the base between the euro and CNH, says Cheung.