This week, the Luxembourg Stock Exchange (LuxSE), Orient Securities Company Limited (DFZQ), Shanghai Clearing House (SHCH) and Euroclear Bank announced the successful listing of DFZQ’s EUR 100 million Yulan bond on LuxSE’s Euro MTF.
Through the listing of this bond, LuxSE becomes the first European exchange to list and admit this unique asset class to trading. Yulan bonds are issued through the Shanghai Clearing House, and are especially designed to link Chinese issuers with global investors.
“The listing of the first Euro-denominated Yulan Bond marks a milestone in DFZQ’s pioneering efforts toward further financial market opening-up and high-level development in the bond market, especially in 2024, a critical year to the 14th Five-Year Plan. We would like to express our gratitude to Luxembourg Stock Exchange, Shanghai Clearing House and Euroclear Bank, as well as all the investors who have consistently shown exceptional support for us. Going forward, DFZQ will continue to contribute to the development of a robust financial industry,” commented Lu Weiming, President of Orient Securities Company Limited.
A pathway to international capital markets
A Yulan bond is an offshore bond issued by a Chinese-based entity through SHCH and settled exclusively through Brussels-based Euroclear Bank. Yulan bonds give Chinese domestic entities the opportunity to access international capital markets thanks to the cross-border cooperation between SHCH and Euroclear Bank as domestic and foreign central securities depository infrastructures.
The aim of these bonds is to further facilitate investment flows between international investors and Chinese issuers, and thereby expand financing options for Chinese companies. The structure derives its name from the yulan flower, which is the official flower of the city of Shanghai where this bond type was created. The first Yulan bond was issued by Bank of China in 2021.
Deputy General Manager, Shanghai Clearing House, Mr. Wang Weiqiang stated: "This successful listing proves that Yulan bonds are in line with international market regulation
and practice, and will help improve market liquidity of Yulan bonds and advance its price discovery function. In the next step, under the guidance of the regulatory authorities, Shanghai Clearing House will continue to optimise the business mechanism of Yulan bonds together with our market infrastructure and institutional partners, to provide safe and high-efficiency infrastructure services for domestic and foreign issuers and investors, and contribute to the high-level opening up of China's financial market.”
New cross-border opportunities
The listing of DFZQ’ Yulan bond on LuxSE was made possible through a tripartite collaboration between LuxSE, SHCH and Euroclear Bank together with the issuer, which gives international investors a new opportunity to trade the Chinese bond on LuxSE’s market, with trade settlement to take place in Euroclear Bank’s environment.
Philippe Laurensy, CEO of Asia Pacific at Euroclear, said: "This listing represents a significant achievement for our Yulan bond structure. Collaborating with key partners, Orient Securities, Luxembourg Stock Exchange and Shanghai Clearing House enables us to offer a new investment route into China.”
LuxSE as a gateway to China
For more than 40 years, LuxSE has been the European listing venue of choice for Chinese issuers wishing to tap into international capital markets, and for international investors looking to channel capital into the capital market of China.
Through the listing of DFZQ’s Yulan bond on LuxSE, the exchange cements its position as a key infrastructure in bridging the gap between Chinese and international capital markets and reaffirms its position of contributing to the development of China’s bond market on the international stage. In April this year, LuxSE welcomed the first Panda bond to be listed on the exchange, issued by the Asian Infrastructure Investment Bank. Panda bonds refer to a CNY-denominated bond issued by a non-Chinese entity in China’s onshore bond market and which is available to both onshore and offshore investors. The exchange is now adding Yulan bonds to its broad range of securities.
“It is our great pleasure to be chosen by Orient Securities to bring its Yulan bond to international capital markets, and we are proud to be the first European exchange to offer the opportunity to trade in this unique asset class. We applaud Orient Securities for its work, and Shanghai Clearing House and Euroclear Bank for their commitment to our shared vision of a truly international and united capital markets ecosystem,” said Arnaud Delestienne, Member of the Executive Committee of LuxSE.