'Dim Sum' bond issuers tiptoe into expensive market

15 May, 2016

Companies looking to tap the offshore yuan bond market to refinance maturing debt this quarter will face a market increasingly wary of the Chinese currency, in the biggest test of investor appetite since issuance dropped off in 2015 Bank of China International's (BOCI) data shows that 52.8 billion yuan ($8.1 billion) worth of offshore yuan bonds, known as dim sum bonds, will mature in the second quarter, 45 percent more than the same period last year and 55 percent higher than the first quarter. A handful of property companies are starting to trickle back into the yuan bond market in Hong Kong.
But rising default risks mean investors will be smaller in number and will ask for higher premiums, keeping borrowing costs high for some time. "Our dim sum pipeline is gradually building up and we have several deals from Chinese names that are expected to be completed this month via private placements," said a debt capital markets banker at a Chinese bank in Hong Kong. Chinese issuers of both yuan- and dollar-denominated bonds offshore switched to raising funds onshore last year because of ample liquidity, a weaker yuan and government efforts to allow easier access to its $7 trillion onshore market.

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