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In late September, just as local-currency Asian bonds were haemorrhaging value, US money was being poured into dim sum bonds. 
Two US asset managers launched the first-ever yuan bond  exchange-traded funds within a day of each other: Guggenheim launched its Guggenheim Yuan Bond ETF on a Thursday, and Invesco  followed on the Friday with its PowerShares Chinese  Yuan Dim Sum Bond Portfolio ETF. Three weeks later, Van Eck  launched its Market Vectors Renminbi Bond ETF.  
All three ETFs include bonds denominated in yuan, whether they are issued by mainland banks and (as of last month) corporates, or foreign multinational issuers of dim sum bonds. 
The dim sum ETFs outlined here are largely available only  to US investors. But the interest they have in  these products signals a coming of age for dim sum bonds. 
These are yuan bonds sold in Hong Kong - a local innovation that is gaining a global profile. 
They tend to be low-yielding  instruments issued by well-established mainland entities (although multinationals are warming to them). 
Investors buy them on the expectation of yuan appreciation. For many, they represent the best means of gaining exposure to  the mainland's economic growth. 
Bond ETFs track a bond index and consist of only the largest and most liquid in that index. Being tradable on large, well-regulated exchanges, the funds are liquid, active and transparent - qualities not typical of traditional bonds. 
Dim sum ETFs  have all these qualities. In less than a month, the three new yuan bond ETFs approached US$2 billion in value. 
'The Guggenheim Yuan Bond ETF provides investors with the chance to benefit from the appreciation potential of the yuan, a currency that previously has been difficult to access,' says Scott Minerd, chief investment officer at Guggenheim Partners.  
That promise of appreciation means dim sum bonds don't have to pay big yields to generate  demand, and, indeed, most of the top issues have coupons of between 2.1 per cent and 3.3 per cent. China's sovereign bond sold in September paid a paltry 1 per cent coupon. 
Demand for emerging market ETFs has been keen in recent months, especially in the local currency space, says Minerd, and Asia is lagging in providing outlets for investment, China especially. 
The dim sum ETFs were launched amid an almighty sell-off in local-currency Asian bonds. This was taking place  owing to a remarkable comeback in value of the US dollar against almost every  currency, with some bonds losing as much as 10 per cent on the day. A few trading days in late September, in many cases, wiped out a bond's gains for the year. 
But dim sum bonds have their own dynamics and appeal, and the outlook for them remains upbeat. 
'The world is transitioning from a period of US dollar dominance to an era of currency blocs that better reflect the dispersion of economic growth,' says Jan van Eck, principal at Van Eck Global. 
'Certainly, the renminbi will be one of those currency blocs, and China has taken significant steps to internationalise the renminbi over the past two years.  As this trend continues, investors should consider allocating to each of these blocs over time.'  
He says yuan bonds are a way to do just that.



Americans get taste for dim sum bonds thanks to spate of US-listed ETFs