TEMASEK Financial (I), otherwise known as TFin-I, will launch a dual tranche offer of 10-year and 30-year Chinese yuan bonds.
TFin-I, a wholly owned subsidiary of Temasek, said on Wednesday (Aug 21) that net proceeds from the issuance will be provided to Temasek and its investment holding companies to fund their businesses.
The bonds will be issued under its US$25 billion guaranteed global medium-term note programme, which is “unconditionally and irrevocably guaranteed by Temasek”.
Moody’s Ratings has assigned Temasek’s proposed offshore Chinese yuan notes a credit rating of “Aaa”.
Rachel Chua, Moody’s Ratings vice-president and senior analyst, said: “Temasek’s ‘Aaa’ rating reflects its strong fundamental credit quality as an investment company, supported by steady dividend income and a large and high-quality investment portfolio.”
She noted that the credit ratings agency expects Temasek to maintain a “conservative financial profile” over the next 12 to 18 months, with the net debt to market value of its portfolio assets excluding cash remaining below 5 per cent and funds from operations interest coverage above 15 times.
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Similarly, S&P Global Ratings has assigned Temasek’s drawdown a rating of “AAA” – the highest possible credit rating.
TFin-I previously issued a total of 1.6 billion yuan (S$293.1 million) in offshore Chinese bonds on three separate occasions, all of which took place this year. The latest issuance on Mar 27 was for a total of about 0.5 billion yuan with a 20-year tenor.
A Temasek spokesperson told The Business Times the three private placements earlier this year, as well as market demand for more high-quality offshore Chinese yuan bonds, factored into the decision to issue these bonds.
The latest dual offering will also allow Temasek to refresh and extend its offshore Chinese yuan curve, the spokesperson added.
As at Mar 31, 2024, Temasek’s net portfolio was about S$389 billion, with about 48 per cent of liquid and listed assets. The company also had cash and cash equivalents, and short-term investments of S$61.8 billion, as well as gross debt of S$20.9 billion, S&P Global Ratings added.
OCBC foreign exchange strategist Christopher Wong said the offshore Chinese yuan was trading weaker, by about 2.7 per cent against the greenback, for most of the year.
Wong said: “An eventual recovery in the Chinese yuan would require China’s economic recovery to gain better momentum, investor confidence to be better ‘repaired’, and for the US dollar to trade weak.”
This comes amid an economic recovery in China that remained bumpy, as well as a property market which had yet to recover despite measures, the OCBC strategist added.
Wong noted that another factor to look out for is the upcoming US presidential elections. The results will have implications on foreign exchange in fiscal, foreign and trade policies, depending on whether Donald Trump or Kamala Harris is elected as the next US president.
A Trump win may see a replay of worsening tensions between the United States and China and that may potentially undermine the Chinese yuan, he said.
