Dim sum bond issuance set to drop 50pc in second half
Bankers say the issuance could drop 50 per cent as yuan demand increases borrowing rates
Dim sum bond issuance could plunge about 50 per cent in the second half of the year from the first half as the cost of borrowing yuan in offshore markets surges relative to the price of raising onshore debt.
Bank executives say policy-easing measures by Beijing to help sustain a mainland economy struggling under a combination of bad debts, industrial overcapacity and volatile export orders will keep benchmark interbank interest rates capped.
Meanwhile, a surge in foreign demand for yuan has pushed up the cost of borrowing the still limited volume of the currency available in offshore markets, making dim sum bonds a less lucrative investment for investors.
"With the rates rising more than 100 basis points over the past four months, the after-swap valuation of dim sum bonds is no longer attractive," said Becky Liu, of Standard Chartered Bank.
The after-swap valuation of dim sum bonds is no longer attractive
Liu expects the total issuance of dim sum bonds in the second half to fall to 200 billion yuan (HK$251 billion) from a record 370 billion yuan in the first half.
HSBC, Bank of China and Standard Chartered are the top three bookrunners of dim sum bonds for the year to date, accounting for 31.6 per cent of the market in terms of the deal value.
