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(Bloomberg) — Baidu Inc. (9888.HK, BIDU) timed it just right with its $1.4 billion debt sale.
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The search engine giant’s offering — coming ahead of a $600 million debt due in April - wrapped up Wednesday, as investors kept bidding up China’s artificial intelligence-linked stocks.
Tapping into this appetite, Baidu snagged coupon rates — 2.7% and 3% for its five- and 10-year yuan-denominated notes, respectively — that were both 10 basis points lower than what larger rival Alibaba Group Holding Ltd. (9988.HK, BABA) got less than four months ago.
Baidu’s deal shows investors are ratcheting up their bets on a recent tech rally sparked by DeepSeek’s breakthrough and the Chinese government’s vow to support innovative technology to revive the economy. Its note sale also may embolden others in the sector to hit the bond market to raise funds, according to Bloomberg Intelligence.
“This is a special timing for Baidu,” said Ting Meng, senior Asia credit strategist at ANZ Bank China Co. “Investor sentiment has improved significantly on China tech this year, after the government switched attitude from strict regulation to supportive.”
Baidu’s notes, marketed offshore, were the company’s first sale in about four years. They were also its first dim sum bond offering, occurring in the midst of rising demand for such products.
With low interest rates in China, dim sum bond sales hit a record 448 billion yuan ($61.8 billion) in 2024, according to Bloomberg-compiled data that goes back to 2007.
Meanwhile, the bond market is poised to see more of Chinese tech companies’ issues, with the sector’s 2025 capital expenditure estimated at about $27 billion, Bloomberg Intelligence analysts Cecilia Chan and Jason Lee wrote in a note.
Cheaper funding costs on yuan bonds, which are currently 220 basis points less than dollar debt, also might encourage issuers, they said.
“More Chinese internet and tech issuers might tap yuan bonds for cheaper funding, following Baidu’s sale,” they wrote. “Investment in AI will be the key driver for bond sales for most Asian internet and tech issuers this year.”
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