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CNH Tracker - New year off to a blazing start for dim sum bonds
January 10, 2013 / 8:13 AM / 5 years ago

CNH Tracker - New year off to a blazing start for dim sum bonds

By Michelle Chen and Saikat Chatterjee
    HONG KONG, Jan 10 (Reuters) - The offshore yuan bond market
made a luminous start to the new year, with nearly 10 billion
yuan ($1.6 billion) of orders  chasing three dim sum bonds that
eventually raised a combined 2.9 billion yuan. 
    Bankers say improved liquidity in the offshore market and 
lower funding costs to obtain yuan will attract more investors
craving higher returns to the market, which is good for the deal
    Strong Chinese trade data published on Thursday also
suggests that economic conditions in the U.S. and China are
improving steadily, encouraging investors to buy offshore yuan
    "We have quite a few dim sum bonds in the pipeline, and I
think the low yield can last for some time as liquidity is
strong," said a debt capital market banker in Hong Kong.
    HSBC, which topped the dim sum bond issuance league table in
2012, was the first to tap the market this year with a rare
floating-rate note, attracting vigorous demand and pricing at
the tight end of guidance. 
    Pricing at three-month Shanghai interbank offered rate
(Shibor) minus 60 basis points, which translated to around 3.3
percent yield for the two-year offering, was seen to be well
priced given its floating-rate coupon.  
    Most offshore market players still prefer fixed-rate bonds
since there are few instruments they can use to hedge the risk 
of volatility in the Shibor rate - which is determined by 
onshore money market conditions.
    Following the HSBC note, state-owned Guangdong Nuclear Power
reopened its November 2015 bond and assembled an orderbook three
times that of the issue size, enabling it to price the bond 17
basis points lower than the 3.75 percent level of two months
    Sentiment in the market is quite good at present, and
well-funded global investors are taking a more bullish view on
the yuan as well, which attracts them to yuan assets,
said a banker in Hong Kong.
    The interbank lending rate in the offshore yuan market has
been hovering around historical lows after the New Year holiday,
making it easier for investors to obtain the currency to invest.
    The overnight yuan lending rate in Hong Kong offered by Bank
of China Hong Kong fell to 1 percent on Thursday
from a record high of 5.5 percent seen last September.
    "We have seen inflows into dedicated RMB bond funds in the
last month or so averaging a billion yuan a week, and this money
is from retail investors in Europe and other parts of Asia,"
said the head of a bank trading desk. 
    So far demand is focused on high-grade issuance, but
investors are warming to high-yield as well, he added.
    Global risk-on sentiment is also reflected in the booming  
dollar bond market at the beginning of the year, where three
junk-rated Chinese real estate firms drew in a gargantuan $45.8
    Shimao Property's $800m bond ushered in a new
reality to China high-yield property bonds by pricing
aggressively, following last week's trades from Country Garden
 and Kaisa Group which arguably came too
   * Asset managers E Fund (Hong Kong) and China Asset
Management (Hong Kong) secured a further 800 million yuan quota,
respectively, to invest in the mainland's capital market via
offshore fixed-income funds denominated in yuan, amid global
investors' increased interest in buying yuan assets.
   * International payments in China's yuan surged 24 percent in
November from the month before and reached a record 0.56 percent
of the global total, transaction services organisation SWIFT
said, as China moves to internationalise its currency.
   * Swedish lender Svenska Handelsbanken AB completed
the sale of a 400 million yuan three-year dim sum bond priced at
3 percent, in which the order book reached 2.5 billion yuan.
   * The return of growth momentum in China's economy and an
improvement in trade will benefit the yuan, which is likely to
appreciate about 2 percent in 2013, said Cindy Fu, regional head
of capital market products and securities brokerage at Standard
Chartered (Hong Kong)'s wealth management department.
   * Yuan deposits in Taiwan banks' offshore business units
(OBU) increased by 11.3 percent month-on-month to reach 21.5
billion yuan by the end of November and yuan cross-border trade
settlement rose by 43.4 percent to 7.56 billion yuan, according
to data released by Taiwan central bank. 
   * Hong Kong Exchanges and Clearing Limited said it will
introduce options on January 21 on Hong Kong dollar-traded units
of the CSOP FTSE China A50 ETF and ChinaAMC CSI 300
Index ETF, both of which have A-shares as their
underlying benchmark, to strengthen the China dimension in its
stock options offering.

    Recent dim sum bond issuance:
    Book runner:          Proceeds (RMB mln):       # of issues:
    1.Standard Chartered         1,250.0                   1
    2.National Australia Bank     650.0                    1
    3.HSBC                        600.0                    2
    4.ICBC                        576.7                    2
    5.Agricultural Bank of China  376.7                    1
    * Thomson Reuters data as of Jan. 10. 
CNH Tracker-Dim sum bond market set for a brighter 2013
Bumper 2012 a hard act to follow for Asia's dollar credits
More stories about the CNH market                 
Daily onshore yuan reports                        
Daily China money market reports                  
Offshore yuan rate    Onshore yuan rate  
Offshore yuan dealt Onshore yuan on CFETS 
Offshore yuan bonds 
($1 = 6.2262 Chinese yuan)

 (Editing by Eric Meijer)

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