Fostering connectivity
Citic Securities expertly handled changing regulations and evolving macro-economic and geopolitical conditions, while meeting clients’ funding needs at home and overseas. For tackling a myriad of headwinds with dexterity, Citic is IFR Asia’s Asian Bank of the Year.
Chinese capital markets activity remained predominantly onshore, but Citic Securities found opportunities to bring Chinese issuers offshore and take foreign companies to the renminbi market.
Having successfully integrated the CLSA business it acquired in 2013, Citic leveraged its extensive network within and outside mainland China to match investor demand with issuers’ funding needs.
That enabled it to generate nearly US$1.8bn in investment banking fees at a time when many of its international rivals were cutting headcount in Asia as deals dried up.
The bank, which currently operates in 13 countries, “is dedicated to fostering connectivity in the international capital market,” said Yang Yu, head of investment banking (international) at Citic. “We serve as a reliable bridge for our global clients, facilitating the expansion of their businesses and investments between China and overseas markets.”
US dollar bonds were expensive for issuers as interest rates remained elevated, making onshore bonds more appealing for Chinese issuers. Those looking to reach a broader range of investors while keeping funding costs low turned to the Dim Sum market.
Some international issuers printed Panda bonds to take advantage of relatively lower funding costs – a market where Citic played a leading role connecting foreign companies with Chinese capital.
Citic led almost 4,000 renminbi bond deals totalling Rmb1.7trn (US$238bn) for the number one spot and a market share of 7.5%.
In May, Citic Securities acted as joint underwriter for New Development Bank’s three-year Rmb8.5bn Panda bond, which was the largest single-tranche issue size by a multilateral development bank in the Panda bond market.
Notable anchor orders and robust demand from a diverse investor base, as well as substantial participation from central banks in onshore and offshore markets contributed to the success of the issue.
In October, Citic was the sole lead underwriter for Hong Kong-based State Grid Overseas Investment’s Panda bond. The deal was the first Panda bond by a Chinese state-owned enterprise’s offshore financial vehicle. The decision to tap the onshore market with a guarantee from parent State Grid Cooperation of China reduced the issuer’s financing costs, and further expanded its funding channels.
Citic also brought the first Tier 2 Panda bond, raising capital for a Hong Kong bank after extensive work with onshore regulators and investors.
In August, the bank was the joint global coordinator for a Rmb5bn Dim Sum bond offering by the People’s Government of Shenzhen Municipality of Guangdong Province. Citic was able to deploy an appropriate pricing strategy, helping the client identify and capture the right market window and lock down substantial anchor orders.
The Dim Sum issue incorporated green and social tranches, another key theme for Citic. In 2023 the bank underwrote domestic green bonds and overseas ESG bonds worth Rmb77bn.
“We’ve integrated ESG principles and sustainable development into businesses and supported green transformation in the industrial and energy sectors,” said Chun Zheng, head of debt capital markets.
The bank was the lead underwriter for China Three Gorges’ Rmb2bn green enterprise bond in October, which helped fund the construction of two hydropower plants, and helped State Power Investment Corp Guangdong issue green asset-backed securities.
Citic also dominated on the equity capital markets side as onshore market activity remained fairly robust. It led the league table with US$20.7bn of volume and a 16.1% market share.
China led the world in IPO fundraising in 2023, and Citic completed 140 A-share equity deals, but it had to navigate changes to regulations throughout the year.
The bank’s timely completion of Shaanxi Energy’s Rmb7.2bn IPO in Shenzhen in April stood out. The landmark deal was the largest transaction on the main board among the first batch of companies to come to market after the implementation of a new pricing mechanism. The US-style IPO registration mechanism for IPOs gives issuers more flexibility in setting pricing and imposes fewer constraints on secondary trading movements.
Leveraging its strong policy understanding alongside accurate valuation and pricing as lead sponsor, Citic helped Shaanxi Energy wrap up its issuance and listing within a month, half the normal issuance window.
Offshore, Citic was the joint sponsor for Sichuan Kelun-Biotech Pharmaceutical’s Hong Kong IPO. The cancer-treatment-focused drugmaker’s offering drew cornerstone subscriptions from several healthcare-focused investors and anchor investments from a number of long-only and healthcare specialist funds.
It also worked on deals as far afield as Indonesia and Malaysia, playing lead roles on copper and gold miner Amman Mineral Internasional’s upsized Rp10.7trn (US$714m) IPO and health supplement maker DXN Holdings’ M$653m (US$147m) float.
“We executed 33 equity transactions (in offshore markets), including the first national joint-stock bank A+H rights issue in the past decade and the largest (global depositary receipt) deal in 2023, which we served as the sole global coordinator,” said Zongbao Zhang, global head of equity capital markets at Citic Securities.
Zheshang Bank’s Rmb12.5bn 3-for-10 rights issue required a multi-week process, with the A-share component coming in June and the H-share part in July, leaving the underwriters, led by sponsor Citic, facing lengthy market risk.
Citic was sole global coordinator for Zhejiang Huayou Cobalt’s upsized US$582.5m Swiss GDR offering, which took advantage of investor interest in materials used in electric vehicle batteries to complete the biggest GDR deal of the year. It also helped Yongtai Technology bring a US$70m offering that was the only GDR deal in London in 2023.
Citic Securities was the lead underwriter for China Yangtze Power’s share placement to raise funds for its Rmb80.5bn purchase of Three Gorges Jinsha River Yunchuan Hydropower Development, which owns the Wudongde and Baihetan power stations, from China Three Gorges. The acquirer agreed to pay 20% of the consideration in new China Yangtze Power shares, 20% in cash raised from issuing shares to investors, and 60% through cash and debt.
The Rmb16.1bn share issue was the largest private placement in China’s A-share market during the year and was more than 3.5 times oversubscribed.
The bank also helped pre-IPO investors make orderly exits from listed stocks, becoming a leader in inquiry transfers on the technology-focused Star market. Citic led the Rmb8.4bn inquiry transfer for Montage Technology, equivalent to around 14% of outstanding shares, bringing in new institutional investors. The transaction involved more than a dozen shareholders and was the largest such deal of the year, unlocking liquidity for existing investors without disrupting the stock.
Having demonstrated the value of its overseas network, Citic plans to expand further to reach new pockets of liquidity and serve new clients. Germany and the Middle East are the next targets.
“We have a strong expansion strategy. On top of establishing our footprints in new markets, we plan to make our existing presence stronger,” Yu said.
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