SAMURAI BOND
Samurai Bonds are bonds issued on the Japanese capital market in Japanese yen by corporations, supranational organizations, and foreign governments. With the help of this bond, businesses and organizations can raise capital in Japan by tapping into the country’s deep pool of savings and investment. Samurai Bonds serve several purposes, including helping issuers diversify their funding sources, providing access to the Japanese investor base, offering competitive pricing, lower borrowing costs compared to domestic markets, and offering better yields than other fixed-income investments, making them attractive to investors. In addition, the issuing entity can benefit from the lower cost of converting the proceeds of this bond to a different currency due to the varying preferences of the investors, which depend on the market segments and distinctively affect the bond market.
PANDA BONDS
Panda bonds are bonds issued in mainland China that are denominated in renminbi and are issued by non-Chinese entities. They give businesses a way to fund their operations in mainland China in RMB without taking on foreign exchange risks. This allows them to access a large pool of investors and obtain the renminbi (RMB) cash they require at competitive rates. Even though Panda Bonds have existed for more than ten years, the PBOC’s expansion and a number of rule adjustments in 2015 saw them really take off.
The National Association of Financial Market Institutional Investors (NAMFII) regulates the over-the-counter interbank market for Panda bonds, and the China Securities Regulatory Commission (CSRC) oversees the exchange market, which consists of the Shanghai and Shenzhen stock exchanges. The bonds naturally draw a majority of Chinese investors because they are marketed locally in China; however, because of access via Bond Connect, the Qualified Foreign Institutional Investor program, and the Interbank Market Scheme, the note’s investor base has lately expanded to match the issuers’ international reach.
The People’s Bank of China (PBoC), the State Administration of Foreign Exchange (SAFE), and the China Securities Regulatory Commission (CSRC) jointly issued a circular on 27th May 2022 to facilitate Foreign Institutional Investors to Invest in China’s Bond Market. The goal of the new regulations, which will take effect on 1st January 2023, is to harmonize the requirements and entrance processes for foreign investment in China’s bond market.
SUKUK BONDS
Sukuk bonds are financial instruments such as Ijarah, Diminishing-Musharakah, Musharakah, Murabahah, and Salam that comply with Shariah law and symbolize ownership of underlying assets. They embody undivided shares in the ownership of tangible assets linked to specific investment projects or commercial enterprises as opposed to a traditional bond, which reflects the issuer’s debt obligation.
Basically, Sukuk operates like this: an originator (business or government) that needs money first creates a Special Purpose Vehicle/Entity (SPV/SPE). After that, Sukuk certificates are issued by the SPV and sold to investors. These certificates are issued in the investor’s name and have the same value.
Issuing in the investor’s name contributes to proving that the holder is the one with ownership of the money obligations specified in the certificate. The originator purchases assets with the proceeds, which may be cash, real estate, usufructs, services, or a mix of these. Typically, the originator repurchases the asset from the SPV for a nominal value after the contract expires. The holders of Sukuk certificates receive the acquired proceeds from the SPV thereafter.
