Monday, June 18, 2012

What are Dim Sum bonds?

What are Dim sum bonds?
Dim Sum bonds is the name given to bonds that are denominated in the Chinese currency (Yuan or also known as renminbi) and issued in Hong Kong. Companies based in China or Hong Kong usually issued Dim Sum bonds, this market is quite recent, indeed the first issue of dim sum bonds was in July 2007 by “China Development Bank”
 Since 2010, Foreign firms who also want to take advantage of the fast growing Chinese market can issue Dim sum Bonds, the first foreign company (non-financial)  to issue it was Mc Donald.
Investors:
Foreign Investors are showing a growing interest in Dim Sum bonds as they can gain exposure to Yuan denominated assets, indeed Dim Sum bonds are structured to avoid the regulations on securities  in China that restrict foreign entities to invest in Chinese debt.
Issuers:
The issuers of dim sum bonds are largely entities based in China or Hong Kong, and occasionally foreign companies
Motivations for Issuers and Investors:
Dim Sum bonds are interesting for Issuers as they can issue a Yen denominated bond without being present physically in China and without going through the Chinese regulations.
Concerning investors, Dim Sum Bonds are an alternative investment to diversify their portfolios and spread risk, on the other hand it is also a good opportunity to bet on the appreciation of the Yuan.

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