Dim Sum bonds come to Hong Kong’s rescue, as 45 per cent surge in issuance keeps financial doomsayers at bay

Issuance in Hong Kong of corporate debt denominated in the offshore Chinese yuan surged 45 per cent to US$21.7 billion this year, according to Bloomberg’s data

That is the biggest for the January - August period since 2014

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A billboard at the Bank of Communications branch in Central marking the issuance of yuan-denominated bonds in Hong Kong on 21 May 2014. Photo: SCMP

Published: 10:35am, 18 Aug 2022

Predictions of a decline in Hong Kong as a financial hub look premature, at least as far as offshore yuan debt deals are concerned.

Issuance in Hong Kong of corporate debt denominated in the offshore Chinese yuan has surged 45 per cent to US$21.7 billion so far this year, the most for the period since 2014, Bloomberg-compiled data show. Sales of so-called Dim Sum bonds have jumped as yuan borrowing costs are more attractive for issuers than US dollar rates, while for investors the notes often offer better yields than mainland China’s yuan debt.

That’s one piece of good news for the Hong Kong debt market, where dollar bond sales have plunged as Federal Reserve rate hikes push up US currency funding costs and China’s property woes cause investors to shun the debt of the nation’s high-yield issuers. Most of the Dim Sum bond issuers are from outside of China, and the increase in their sales is in line with Chinese policy makers’ drive to boost international use of the yuan.

Rising Dim Sum bond issuance “shows Hong Kong still plays a role as a link to the rest of the world and Mainland China in the financial market,” said Iris Pang, chief economist for Greater China at ING Groep.

Non-Chinese financial firms have dominated issuance of Dim Sum notes this year, led by Citigroup with US$1.7 billion in deals, according to Bloomberg-compiled data.

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