Research On The Influencing Factors Of Kungfu Bond Issuance Pricing

The Kungfu bonds studied in this paper refer to the dollar denominated bonds issued by Chinese enterprises in the international market.Since 2010,the issuance scale of Kungfu bonds has increased rapidly.By 2020,the Kungfu bond market has grown into a huge market with a stock scale of more than US $1 trillion.With the development of the market,investors pay more and more attention to the reasonable pricing of bonds.Issuers also need to estimate their own financing costs and clarify what measures can be taken to reduce financing costs.The research on the influencing factors of Kungfu bond issuance pricing can make some contributions in these aspects.This paper combs the regulatory policy,issuance process and current situation of Kungfu bonds.At the policy level,since 2015,the supervision of Kungfu bonds has been gradually liberalized,and the policy orientation has the following characteristics:the issuance approval has been gradually relaxed,the restrictions on the return use of funds have been relaxed,the prudent attitude has been maintained on the scale of foreign debt,and the key supervision of high-risk industries such as real estate has been carried out.In terms of issuance status,the annual issuance scale of Kungfu bonds remains at the level of US $100 billion,the issuance interest rate is low,the issuance period is mainly short-term and medium-term,and there is a lack of rating in the market.Financial companies,real estate enterprises and urban investment enterprises issue the most bonds,among which the issuance cost of real estate enterprises is high.In terms of theoretical research,combined with the existing literature and classical theories,this paper puts forward nine potential factors affecting the pricing of Kungfu bonds and analyzes their influence.Referring to the theory of interest rate parity,the issuing rate of Kungfu bonds is related to the discount rate of US dollar.When the US dollar rises,the attractiveness of US assets will increase,and the strong demand is expected to lower the interest rate of Kungfu bonds.The federal funds rate reflects the liquidity of the US dollar and is expected to have a positive impact on the issuance rate of Kungfu bonds.In areas with high level of economic development and superior financing environment,the issuer’s business environment is better,and the issued Kungfu bonds are expected to have lower issuance rates.Bond rating can reduce the information asymmetry in the Kungfu bond market,and high rated issuers are expected to enjoy lower issuance costs.Compared with private enterprises,stateowned enterprises have certain advantages in operation and capital acquisition,and can enjoy the implicit guarantee of the government.The risk of bond default is lower,and the issuing rate of bond is expected to be lower.According to the liquidity premium theory,the issuance cost of long-term Kungfu bonds is expected to be higher.The issuance scale and interest payment are also expected to affect the issuance cost of Kungfu bonds.Empirically,based on the data of 2040 Kungfu bonds issued from 2010 to 2020,this paper constructs a regression model with bond coupon rate as the dependent variable and exchange rate and other influencing factors as the independent variable.The empirical results show that the influencing factors have a significant impact on the coupon rate of Kungfu bonds,and the impact direction is consistent with the expectation.Considering the impact of the heterogeneity of issuer’s nature of ownership on the pricing of Kungfu bonds,This paper regresses the samples according to different groups of issuer’s nature of ownership.The empirical results show that compared with private enterprises,the bond rating has less significant effect on the reduction of the coupon rate of state-owned enterprises.This may be because investors pay more attention to the government support and implicit guarantee that enterprises can obtain when investing in the Kungfu bonds of state-owned enterprises,and the reference function of bond rating is weaker.The effect of regional financing scale on the reduction of the coupon rate of state-owned enterprises’ Kungfu bonds is also weaker,which indicates that state-owned enterprises are less constrained by the regional financing environment.This paper also introduces domestic RMB denominated corporate bond data to build a regression model to compare the similarities and differences in bond pricing at home and abroad.The empirical results show that when the US dollar is expected to appreciate,the coupon rate of domestic corporate bonds increases;In the domestic bond market,bond rating can also reduce the coupon rate of bonds,but the rating of domestic bonds is generally high,and the rating difference of different bonds is small.Therefore,the effect of reducing the coupon rate of bond rating is not as obvious as that of the Kungfu bond market.Combined with the above research results,this paper puts forward feasible suggestions for investors,Kungfu bond issuers and regulators.