Asia Pacific
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China’s strict controls on CNH liquidity will hamstring London’s offshore renminbi capabilities despite bankers’ best intentions.
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Hong Kong’s status as the financial gateway to China would be far from diminished if the offshore and onshore markets merged. In fact, the city could well benefit from the move.
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Bond dealers are predicting a strong growth in the dim sum market including the development of longer tenors and more highly structured products.
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As the dim sum market evolves, scepticism about currency appreciation and the slowdown of hot money inflows has led to weaker liquidity, says UBS.
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The dim sum bond market is expected to remain buoyant for the rest of 2012, despite rising yields due to its strong liquidity, investor base and growing recognition, believes the bank.
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China is planning to issue a sovereign bond this summer, which will lead a trend for longer-dated and hybrid dim sum debt, says Barclays.
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Hybrids and convertible bonds will be the next product evolution in the offshore renminbi debt market.
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The currency is likely to appreciate due to China’s strong economic growth, and it could reach ‘basic convertibility’ by 2015, says Yiping Huang, chief emerging Asia economist of the UK bank.
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Dim sum issuers need a change of strategy to remain competitive as investor demand for these instruments evolve from a currency to credit play, believe experts.
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Top 3 Offshore RMB DCM Transactions - 2012 YTD
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Debt bankers think more Korean issuers will tap the Thai baht market over the next few months, driven to local currency funding by rising costs in the international bond market.