Slowest summer sales in three years for dim sum bonds
Borrowing costs surge and yuan gains slow as Beijing eyes easier access to local bond markets
Dim sum bond issuance continues to be sluggish after the slowest summer sales in three years as the advantage to mainland firms of borrowing offshore diminishes along with reduced expectations for appreciation of the yuan.
Issuances excluding certificates of deposit slumped to 1.9 billion yuan (HK$2.4 billion) in the past two months, compared with 22 billion yuan in the same period last year and 24 billion yuan in 2011, data shows.
Dim sum offerings were equivalent to US$86 million this month, including a sale by Swire Pacific, compared with US$835 million of new US dollar securities from mainland firms.
Dim sum borrowing costs are surging amid slower yuan gains as Premier Li Keqiang targets a reduced pace of economic growth and eases restrictions on investing in local bond markets.
The average dim sum sovereign yield was 48 basis points lower than the similar rate in Shanghai on Wednesday, compared with a record 275-basis-point discount in June 2011, HSBC indices show.
We don’t have a lot of selling points with the yuan at the moment
"There's limited incentive for issuers to tap the dim sum market, as they no longer see attractive cost advantages," said Ronald Lee, the chief trader for fixed income at the Hong Kong branch of Bank of Communications, the mainland's fifth-largest lender by market value. "For investors, liquidity is the most important factor. That's why they prefer dollar issues over dim sum bonds."