Russian bank targets Hong Kong
VTB looking to bring Russian clients to Dim Sum, IPO markets
Nethelie Wong, International Financing Review Asia (HK)
Russian investment bank VTB CAPITAL has opened its first office in Hong Kong, stepping up its bet that companies from its country will become a feature of the city’s capital markets next year.
It plans to boost its Hong Kong team to around 30 to 35 people, from the current seven, within the next two years. The investment bank has yet to name a head for its newest office.
“We see many prospects to develop our business in Hong Kong and greatly value the attractiveness of Asian debt and equity capital markets for Russian companies interested in attracting investments,” said Alexey Yakovitsky, global CEO and chairman of the management board of VTB Capital holding companies, at an opening ceremony on November 15.
Several Russian companies are eyeing Hong Kong’s debt and equity capital markets, and these include state-owned RUSSIAN RAILWAY, which completed a non-deal roadshow in the region in early November with the help of VTB Capital and JP Morgan.
Encouraged by the keen interests of Asian investors, the Russian railway operator is considering issuing local currency bonds denominated in Hong Kong dollars and/or offshore renminbi.
“There are good arbitrage opportunities to tap those markets as the funding costs after swap could be lower than those of direct US-dollar funding as the costs of borrowing US dollars have risen in the past few months,” saidAndrey Solovyev, global head of DCM at VTB Capital.
“With the ongoing financial crisis, investors, in US dollars or Dim Sum alike, have become more cautious and are more willing to look at top corporate credits with investment grades,” added Solovyev. “At the same time, Russian investors would love to add renminbi exposure to their portfolios, especially from Russian credits with which they are familiar.”
VTB Bank is the only Russian issuer to have tapped the Dim Sum bond market. It closed a three-year 2.95% deal of Rmb1bn (US$156m) via HSBC and VTB Capital in December 2010. Word is that the proceeds from the deal were swapped back to US dollars, even though the swap market was quite shallow at that time.
RUSAL, Oleg Deripaska’s aluminium company, was also looking to issue Dim Sum bonds early this year, but backed down. Rusal listed in Hong Kong in January 2010 to become the first Russian company on the city’s bourse.
“With the rapidly growing renminbi deposit base, as well as the renminbi swap market, the offshore renminbi bond and swap markets will be able to handle much larger deals next year,” said Solovyev.
Russian Railway, rated Baa1/BBB/BBB, found Asian interest for its US-dollar bond last year and again for its two sterling bonds in February and June this year. In fact, keen interest was noted from both sides of the strait when it visited China and Taiwan.
On the equity side, four to five Russian firms – from the energy, natural resources to consumer sectors – are eyeing Hong Kong listings, according to VTB Capital.
Power company EUROSIBENERGO, also under the control of Deripaska, is one of the candidates, having pushed back its planned US$1bn Hong Kong listing due to volatile markets.
VTB’s Hong Kong office is its North-East Asian hub, while the Singapore one covers South-East Asia.
VTB Group also has offices in Beijing, Dubai, New Delhi and Shanghai, in addition to those in Europe. VTB is the first Russian bank to conduct renminbi businesses onshore and offshore.