16 February 2019
Dim sum bond supply and demand are expected to remain robust. Photo: Bloomberg
Dim sum bond supply and demand are expected to remain robust. Photo: Bloomberg

Yuan fall fails to dent taste for dim sum bonds

The yuan may have fallen but that hasn’t taken a bite out of investor appetite for offshore renminbi bonds, known as dim sum bonds, the Hong Kong Economic Journal reported Monday, citing Tee Choon-hong, head of offshore renminbi capital markets at Standard Chartered Bank (Hong Kong) Ltd.

Tee said the stable interest in the products reflects maturity among investors as they assess the bonds based on market progress, issuer credit quality and product yield, rather than currency movements.

More than 230 billion yuan (US$36.91 billion) in dim sum bonds and one-year certificates of deposit have been issued this year despite a sustained fall in the value of the yuan. The amount is two-thirds of the 310 billion yuan of similar products issued last year.

Tee expects the issuances to come in at 400 billion to 450 billion yuan this year. After certificates of deposit of up to one year are factored in, the total issuance could amount to 550 billion to 580 billion yuan this year.

Investors are expected to gain from currency swaps this year as they exchange dim sum bonds for assets denominated in US dollars, avoiding volatility risks associated with the Chinese currency.

Tee said supply of and demand for the bonds are expected to remain robust given favorable conditions in the market, including a growing offshore yuan pool and the refinancing needs of some existing soon-to-mature dim sum bonds, such as those from the property sector.

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