The dim sum bond market blends local flavour with international flair
Michele Barlow, head of AP credit and convertible bonds research at Bank of America Merrill Lynch Global Research, feels that the dim sum bond market has gotten off to a strong start in terms of depth and innovation. November 22, 2011 | Michele BarlowIntroduced in 2007, the off-shore renminbi (Rmb) bond market (also known as the CNH or dim sum bond market) really took off in the second half of 2010 after a Hong Kong Monetary Authority circular issued in February expanding on the supervisory principles and the operation arrangements regarding the cross-border fund flows of Rmb and the development of Rmb business. This removed any prior, implicit restrictions on the category of potential issuers for Rmb-denominated bonds and facilitated the development of RMB-denominated financial services in the city. The Rmb trade settlement program, which started in July 2009 on a trial basis and was expanded in June 2010, also fuelled a surge in Rmb deposits in Hong Kong banks. Since end-2010 we have seen the dim sum bond market grow 263% to an outstanding size of Rmb196 billion ($31 billion). While the size of the dim sum bond market is small in the context of the on-shore Chinese bond market, it has generated a lot of interest as it offers access to RMB-denominated assets to off-shore investors looking for exposure to this asset class. Emerging market bonds have attracted considerable attention, particularly in local currency, no doubt influenced by record low yields and a wave of sovereign downgrades in a number of developed bond markets. To help a growing number of Rmb bond funds track growth and performance, BofAML recently launched a dim sum bond index with the aim of giving investors a comprehensive view of the structure, risk characteristics and performance of the rapidly expanding market. What makes the dim sum bond market different is that it blends the flavour of local currency investing without the need for an on-shore license, providing easy access to international investors. This has attracted local and overseas asset managers which are setting up a growing number of Rmb denominated funds and ETFs. As a result, there has been a shift in investor base - funds now account for over 50% of new is... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Asset Management, Trustees and Custodians, China, Credit Risk, Hong Kong, Markets & Exchanges, RmbTrustees Custodians and Depositories,China,Credit Risk,HK,Markets Exchanges,Rmb, Asset Management, Trustees and Custodians,China,Credit Risk,Hong Kong,Markets & Exchanges,Rmb, Keywords:BAML, Dim Sum Bond, CNH, ETF, ICBC BAML, Dim Sum Bond, CNH, ETF, ICBC
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