Retail investors in Hong Kong are showing less appetite for dim sum bonds this year, as expectations of rapid gains in the value of the currency diminish.
Subscriptions for yuan-denominated debt, also known as dim sum bonds, exceeded 17.48 billion yuan (HK$21.23 billion) during an offer period from June 29 to yesterday, according to the Ministry of Finance. The amount represents about 3.18 times of the retail issue, set at 5.5 billion yuan. The issue date is July 19.
The figures are lower than those from last year, when retail investors applied for 20.18 billion yuan worth of bonds, which exceeded the 5 billion yuan of bonds on offer by 4.04 times.
'I don't find it very attractive,' said small investor Oscar Man. 'I don't think there is a huge difference between subscribing for the bonds and making a fixed deposit in yuan. The latter even gives give me more flexibility.'
He said iBonds, the inflation-linked product issued by the Hong Kong government, were more attractive. He was allocated HK$40,000 worth of iBonds last month and expects them to pay an annual interest rate of about 5 per cent.
The dim sum bonds have a two-year tenor with an annual interest rate of 2.38 per cent, comfortably higher than deposit interest rates. This year's retail interest rate is much higher than last year's coupon rate of 1.6 per cent.
Nathan Chow, an economist at DBS Bank, told the South China Morning Post earlier that people were less excited about the product because 'they are less confident that the yuan will continue to appreciate strongly'. Standard Chartered economists said last month the yuan was likely to depreciate against the US dollar this year, because of weakening economic growth at home and slumping exports.