Bank of China predicts rapid increase in issuance of dim sum bonds in Australia next year

Bank of China predicts Australian corporate borrowers will start issuing dim sum bonds by the middle of next year after the first offering from a state government.

Last week's sale by New South Wales, the country's biggest regional economy, of 1 billion yuan (HK$1.26 billion) of securities opened the door for non-financial companies that do business with the mainland, said Shanjun Hu, Australia country head for Bank of China, which managed the transaction with Australia and New Zealand Banking Group.

"I can imagine in the coming years more and more Australian companies will participate," Hu said last Thursday.

BOC had spoken to potential issuers and the market might develop "very quickly", possibly reaching "hundreds of billions" of yuan over the next few years, he said.

The NSW offering capped a week in which President Xi Jinping addressed parliament in Canberra, Australia reached a free-trade accord with its largest commercial partner and Sydney was named the world's 12th offshore yuan clearing hub.

Beijing is seeking to encourage greater global use of the yuan with borrowers such as the British Treasury and Caterpillar issuing dim sum debt. ANZ and National Australia Bank have previously sold such bonds.

Australian issuers have sold the equivalent of at least US$79 billion of notes offshore this year, borrowing in currencies ranging from US dollars and euros to Swiss francs and Japanese yen. The domestic market has seen more than A$77 billion (HK$517 billion) in transactions, excluding kangaroo bond sales.