But overall dim sum market seen to expand.
Dim sum bond issuance by non-financial corporates is likely to contract in 2013, though the overall dim sum market will probably expand, driven by issuance from financial institutions, particularly Chinese banks, Fitch Ratings says in a Special Report today.
For the total dim sum bond market, issuance of CNH40.0bn over January-September 2013 represents 165% of 2012's total of CNH24.2bn. However, corporate issuance is struggling to keep pace, with only CNH3.0bn issued over January-September 2013, well below 2012's full-year amount of CNH5.0bn.
Fitch believes that the long-term growth outlook for corporate dim sum bond issuance remains positive, but the market is currently facing a number of headwinds.
Investors have been able to obtain higher yields on US-dollar investment-grade Chinese issues in the secondary market, and relatively attractive returns are available on renminbi deposits. Hence, the yield advantage that was associated with dim sum bonds in 2012 is currently not as strong.
In addition, there is limited liquidity for dim sum bonds, while issues tend to be smaller in size and have shorter tenors than US dollar bonds. Moreover most Chinese corporates expect the yuan to continue appreciating over the next two to three years and this reinforces their preference to issue US dollar bonds.
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