Want some yuan with that Big Mac?
On August 19 McDonald’s (MCD) became the first foreign non-financial company to sell yuan-denominated bonds in Hong Kong.
The U.S. company sold 200 million yuan (about $30 million) of 3% notes due in September 2013. Standard Chartered (SCBFF) was the manager on the sale.
The sale marks another step in China’s plan to create a financial system on a par with the markets in Tokyo and New York. That will eventually require China to turn the yuan into a freely exchangeable currency and China is certainly not willing to go there yet. But in February foreign companies became eligible for the first time to sell yuan-denominated bonds in Hong Kong.
It makes sense for McDonald’s to tap into the Chinese funding pool since it is now a familiar brand name in China.
The company plans to just about double the number of its stores in China by 2013.
Next big U.S. non-financial company on deck in Hong Kong may be Wal-Mart (WMT). Back in March the company indicated that it was studying an issue of yuan-denominated bonds in Hong Kong.
There is an investible idea here.
McDonald’s move to tap the Hong Kong market directly through a bond sale isn’t just a sign of the maturation of China’s currency. It’s also a signal of the continuing shift in the global financial industry toward the emerging centers of Hong Kong, Singapore, Sao Paulo, and Shanghai. That shift will lead to market share gains for the banks and investment banks doing business in those centers. Notice who managed this sale: Standard Chartered, a London-headquartered bank with 150 years of history in Asia. Doesn’t mean that JPMorgan Chase (JPM) or Goldman Sachs (GS) or Citigroup (C) Â can’t compete. But the power it is a shifting.
Having just returned from China I must say they have a small finger print in China. Very few units their presently for both of them
Welcome back Jim, hope your vacation was relaxing.
This Shanghai business is getting interesting, no doubt. No transparency issues, because Wall Street is no more transparent than Shanghai would be.
Got out of POT too early, much to my 20-20 hindsight chagrin, but held on to TNH, thank goodness.
So will our kids need to learn Mandarin, like Jimmy Rogers is recommending?
Given that the world runs on money,, printed by Western Bankers,, I cannot for the life of me figure out how or why they would slit their own throats by building China into what is likely to become an economic, and financial superpower !
China… superpower… beholding to no one on the planet except for their own bankers who print their own money.
Doesn’t that sort of cut the Western financiers/Oligarchs out of the economic loop ?
Maybe after 1000 years of economic control over the planet,,, maybe they have decided to retire and get jobs …. ?
Cause if China keeps growing, they are going to need jobs, cause nobody will want the western banker’s worthless money..
Jim,
Off-topic (for this post) – if you can give your take on how the Potash-BHP deal/tug-of-war will play out, that would be much appreciated. Sold some POT on BHP bid announcement, but I’m still long some POT, and am actually looking for a pullback to buy back in. Thanks.
Jim,
Good insight, as usual. At some point, if you can give us some candidates (in addition to Standard Chartered) to benefit from this power shift, that would be great. But first, I’m looking forward to your post on potential takeover candidates in the agriculture/raw materials sectors.