A pedestrian walks past an ICBC branch in Beijing. The bank is planning to sell yuan-denominated offshore bonds in Hong Kong. Nelson Ching / Bloomberg

Industrial & Commercial Bank of China Ltd is planning to sell yuan-denominated offshore bonds, which will be the first to test Beijing's extended foreign direct investment program, according to a Fitch Ratings release on Thursday.

The proceeds from the so-called dim sum bonds issued by ICBC's Asian unit and sold in the Hong Kong markets will be used by the Hong Kong-listed bank's fully owned subsidiary Chinese Mercantile Bank. It would become the first Hong Kong entity to make a direct yuan investment into the mainland, the ratings company document said.

Bank of China Ltd, Credit Suisse Group AG, DBS Group Holdings Ltd, Goldman Sachs Group Inc, HSBC Holdings Plc and ICBC International will manage the sale, according to a person with direct knowledge of the issue.

ICBC is marketing the bonds, which will probably mature in about 10 years, to investors at a yield of 6 percent, another person with direct knowledge of the sale said. Both people declined to be identified because the details are private.

The offering will also be the first yuan-denominated subordinated note in the so-called "dim sum" market and the first Basel III-compliant security by a Hong Kong-listed bank, Fitch said.

Hilda Chow, ICBC Asia's head of corporate communications in Hong Kong, declined to comment on the bond sale when contacted by e-mail earlier on Thursday.

The central government announced rules allowing foreign direct investment with yuan raised offshore on October 14, relaxing approvals for investments of less than 300 million yuan ($47 million) not involved in the cement, steel, shipbuilding and leasing industries.

Sales of yuan-denominated bonds in Hong Kong jumped to 132 billion yuan this year from 35.7 billion yuan for the whole of 2010, data compiled by Bloomberg show. Other companies planning to sell dim sum bonds include the mainland's Tsinlien Group Co.

The HSBC Offshore Renminbi Bond Index traded little changed at 98.678 on Wednesday, from a peak of 102.35 reached on May 31. The average yield on dim sum bonds jumped 56 basis points, or 0.56 percentage point, to 3.704 percent this month.

Bloomberg

(HK Edition 10/28/2011 page2)