[BEIJING] The parent of Huawei Technologies is tapping low borrowing costs in China’s credit market to raise a record amount of debt, as trade tensions with the US spur a shift towards local financing.
Huawei Investment & Holding has raised 20 billion yuan (S$3.4 billion) via ultra-short-term commercial paper issuance since late March, its biggest onshore year-to-date haul, Bloomberg-compiled data shows. One 246-day note priced at a record low coupon of 1.57 per cent on Wednesday (Apr 23) night, according to people familiar with the matter. Ultra-short-term commercial paper, or SCP, typically carries a tenor of less than 270 days.
The proceeds from the debt sales will be used to supplement operating funds of the company’s headquarters and its subsidiaries, the firm said in exchange filings.
The borrowing spree comes as China’s credit market provides a haven for issuers amid the US-China trade war. With onshore rates near historic lows, large tech firms find local funding far cheaper than offshore US dollar bonds or loans, said Zerlina Zeng, head of Asian strategy at Creditsights Singapore.
“Banks are keen to underwrite and take up these new issues,” as the government focuses on supporting technology and private companies’ funding efforts, she said, adding that some Chinese tech firms may refinance maturing US dollar debt domestically.
The trend aligns with Beijing’s push to boost financial backing for tech innovation. In March, People’s Bank of China governor Pan Gongsheng announced plans to launch a “tech board” in the bond market, facilitating mid-to-long-term debt sales by growth-stage tech companies to fund research and development.
Recent issuance remains skewed towards short tenors. Besides Huawei’s SCPs, ZTE has raised 28.5 billion yuan this year via 23 bond sales, over 90 per cent of which were ultra-short-term notes.
Justin Ong, credit analyst at Columbia Threadneedle, said Chinese tech firms are inclined to access short-term liquidity to navigate macro uncertainties. Investors are also favouring shorter-duration exposure in this climate, he said. BLOOMBERG
