Dim sum issues reflect diversity

Two offerings in Hong Kong's offshore market for yuan-denominated debt signal that a gentle maturing of the three-year-old sector could still be a wild, high-risk ride for the uninitiated.

The Canadian province of British Columbia yesterday closed a 2.5 billion yuan (HK$3.2 billion) sale of a one-year bond that pays a coupon of 2.25 per cent. It was the first foreign sovereign-backed issuer to use the so-called dim sum market, and its triple-A rating put it in the top tier of safety for investors.

At the other end of the spectrum, Thai property developer Ananda Development was selling a perpetual dim sum bond with a 9.5 per cent coupon. Both the issuer and the bond were unrated.

Analysts say the two transactions are clear indications that yuan-denominated debt is becoming an increasingly acceptable asset class to all manner of investors and issuers - whether in the safety of a sovereign bond or the high-yield end of so-called junk bonds.

"The dim sum market was previously limited to Chinese corporates and large multinationals, but it's definitely becoming more diversified. We will see more sovereigns, quasi-sovereigns and Asian corporates using the market," said one investor who had considered the Ananda deal.

The Canadian bond launched with guidance at the 2.35 per cent area and was priced at 2.25 per cent.

The fact that the province was raising a moderate amount of money in an unusual currency at a short tenor suggested the deal was more about building trade relations than funding.