Turkey May Delay Panda Bonds Issuance amid Jittery Markets, Source said

BY SILVI WRITER

 

Turkey’s plan to issue bonds in China’s panda market may be delayed, as Beijing is concerned about Ankara’s economy and stability in the long run, source familiar with the matter told Silvi media.

Issuing panda bonds – yuan-denominated debt sold in China by foreign firms or governments -would help Turkey release its financial stress and would support the falling lira, Turkish currency.

Yet observers also say the panda bonds, whose total size is still quite limited, would be more about China’s political support for Turkey. President Recep Tayyip Erdogan has said Ankara would look to form alternative economic alliance from “Iran, to Russia, to China and some European countries”, after the US imposed sanctions that greatly exacerbated the lira’s troubles.

The source, with a China’s state-owned bank which is a potential underwriters of the possible bonds, said they were “still preparing relevant documents” for approval by China’s Banking Regulatory Commission.

The source added it’s “hard to say” when a decision could be reached, as the approval process “won’t take short”.

The bank is concerned about Turkey’s repayment ability, the source said.

“The collapse of lira may lead to economic and political instability in that country,” the source added. It’s still very early stage. It (the bond) may be delayed.”

In February, the Turkish Ministry of Treasury and Finance has mandated Bank of China (BOC), HSBC and the Industrial and Commercial Bank of China (ICBC) to explore bond issuance opportunities in the panda market, as part of its 2018 external borrowing programme.

Earlier this month, the Turkish newspaper Daily Sabah reported the Bank of China’s subsidiary would help issue panda bonds before the end of the year.

ALSO READ: China to Issue Yuan Dominated Bonds in Turkey, as Lira Crisis Deepens

In late July, the ICBC agreed to provide a $3.6-billion loan package for the Turkish energy and transport sector, according to Xinhua News Agency.

Panda bonds were introduced in 2005 for foreign investors to raise money through yuan-denominated securities. The total size is still quite limited.

Total issuance is expected to top 90 billion yuan ($14 billion) in 2018, according to a January forecast by JPMorgan Chase, recovering from last year’s 40 percent slump to 71 billion yuan and a far cry from the record 116 billion yuan record in 2016.

In March, the Philippines sold 1.46 billion yuan in three-year panda bonds, with a coupon rate of 5 percent, according to the South China Morning Post.

China was Turkey’s largest exporting market in 2017. Turkey shipped $233.8 billion worth of products around the globe in 2017, with more than 10 percent of it went to China.

Turkey’s Ministry of Trade recently declared China as one of the four priority markets for Turkish products, with the others being Russia, India and Mexico.

The lira is now down 40 percent to the US dollar this year, raising widespread concerns over the sustainability of the country’s sizeable dollar-denominated debts.

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