HSBC left off of Chinese $6B bond sale in rare move: Bloomberg

October 13, 2020.

was not involved in arranging a recent $6 billion Chinese government dollar bond sale, an unusual move for the U.K.-based financial institution, which has long had strong ties with the country, Bloomberg reported Tuesday.

The $6 billion sale of multi-tranche notes with 3-year, 5-year, 10-year and 30-year maturities will be arranged by four Chinese banks and nine foreign banks including Standard Chartered, Bank of America and , Bloomberg reported, citing anonymous sources. It was unclear why HSBC was not included among the group, Bloomberg reported.

The development comes as London-headquartered HSBC navigates increasingly fraught geopolitical tensions involving China as the bank also seeks to broadly expand in the region. HSBC is undergoing a restructuring plan that involves doubling down on Asia and the Middle East while cutting $4.5 billion in costs and laying off 35,000 employees, primarily in Europe and the U.S. 

“HSBC is committed to supporting our clients and the opening up of China’s capital markets,” spokesman Rob Sherman told Fastinform. “Meanwhile, we have a good ongoing working relationship with the Ministry of Finance.” 

Sherman added that the bank currently remains the No. 1 foreign bank for G3 debt issuance in China and the No. 2 overall after the

HSBC’s reported omission from the upcoming bond sale is a surprise because the bank has been involved in every dollar-denominated sale of Chinese debt since 2017, according to Bloomberg. 

Along with Standard Chartered, HSBC has bet on its future in China by publicly supporting a national security law that the nation imposed on Hong Kong, curtailing political dissent and free speech in the city-state. 

In response, the U.S. threatened HSBC with sanctions for dealing with Chinese officials and several high-profile investors publicly condemned the bank. 

While HSBC, which oversees $2.9 trillion in assets, lost political capital in the U.S. and Europe for its stance in Hong Kong, Citigroup and Bank of America are reportedly serving as arrangers in the sale despite not publicly supporting the Communist Party’s actions. 

The Chinese Ministry of Finance could not be reached for comment.

HSBC has also drawn ire in China for its alleged cooperation with U.S. prosecutors in investigations of Chinese tech company Huawei. 

Last month, Chinese state-run tabloid the Global Times reported that HSBC may be placed on a government “unreliable entity” list due to its role in the Huawei case, threatening its plans for expansion in China. The bank has disputed Chinese claims that it intentionally sought to undermine Huawei. 

Being frozen out of the Chinese market would be devastating for HSBC, as CEO Noel Quinn has staked the bank’s fortunes on the country, which is the only major world economy not expected to experience a contraction in GDP this year. 

In the bank’s second-quarter earnings release, Quinn said, “Current tensions between China and the U.S. inevitably create challenging situations for a bank with HSBC’s footprint.”

“However, the need for a bank capable of bridging the economies of East and West is acute, and we are well-placed to fulfill this role,” he added. 

In August, HSBC said it would hire up to 3,000 new wealth planners in mainland China. And in August, Ping An, China’s largest insurer and HSBC’s largest shareholder, boosted its stake in the bank to 8%, possibly signaling that the company expects government authorities to take a more accommodating approach. 

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