Lender eyes more dim sum sales in HK

PUBLISHED : Thursday, 19 January, 2012, 12:00am
UPDATED : Thursday, 19 January, 2012, 12:00am


International Finance Corporation, the for-profit lending arm of the World Bank, is aiming to sell more dim sum bonds in Hong Kong this year as it seeks to boost lending in local currencies, according to a top executive.

'We are very much hoping to [sell dim sum bonds this year],' IFC deputy treasurer and head of funding John Borthwick said yesterday.

'There's very strong demand on the investors' side for our bonds,' he said. 'We've even had investors in the US looking to buy dim sum bonds that we had issued. We're an issuer that US investors are familiar and comfortable with and they would very much like to see us issue in the currency.'

Last January, IFC sold its first dim sum bond - a yuan-denominated issue sold in Hong Kong's offshore market for the mainland currency.

That was a five-year, 150 million yuan (HK$184.58 million) bond that pays a 1.8 per cent annual coupon, proceeds from which were transferred back onshore after IFC secured approval from mainland authorities.

The money was then lent to Beijing Shenwu Thermal Energy Technology to fund an expansion of its facilities, which make industrial furnaces that employ environmentally-friendly technology to burn less energy and cut greenhouse gas emissions.

Dim sum issues in Hong Kong increased to 87 new offerings last year that raised 106 billion yuan, up from 36 billion yuan in 2010, according to Hong Kong Monetary Authority chief executive Norman Chan Tak-lam. HSBC Hong Kong chief executive Anita Fung Yuen-mei predicted this week that new dim sum issues will double or triple this year to as much as 200 billion to 300 billion yuan.

The IFC is a so-called supranational lender that seeks to turn a profit while lending to small- to mid-sized borrowers in selected sectors that might not otherwise be able to access funding via commercial lenders or market channels.

On the mainland, the bank focuses on sectors including renewable energy, water and microfinance, and targets borrowers in poorer or less developed rural and inland provinces and regions.

Borthwick said IFC is seeking to boost local currency lending to about 40 per cent of its total book, up from about 20 per cent currently. The majority of loans it extends are still US-dollar denominated.

From a financial perspective, dim sum rates are not as attractive as they were six months ago.

'There's been a lot of volatility in rates and that's really driven by supply and demand,' Borthwick said. 'Now there's a lot more issuance and people have more options in investing in dim sum bonds. So that's raised rates to the point where it actually now makes sense for us to look very seriously at the alternative of the swap.'

Framework agreements for those swaps were signed in November with China Development Bank and the Export-Import Bank of China. They will allow IFC to issue long-term yuan loans in the domestic market, but it has yet to put them to use.