On August 19, McDonald’s (NYSE: MCD) became the first foreign non-financial company to sell yuan-denominated bonds in Hong Kong.
The US company sold 200 million yuan (about $30 million) of 3% notes due in September 2013.
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 outlets in China by 2013.
The next big US non-financial company on deck in Hong Kong may be Wal-Mart Stores (NYSE: WMT). Back in March, the company indicated 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 towards 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 (OTC: SCBFF), a London-headquartered bank with 150 years of history in Asia.
That doesn’t mean that JPMorgan Chase (NYSE: JPM) or Goldman Sachs Group (NYSE: GS) or Citigroup (NYSE: C) can’t compete. But the power it is a shiftin’.
Full disclosure: I don’t own shares of any company mentioned in this post in my personal account.
