China

China Guangdong Nuclear Power Holding Co (CGNPC) debuted in the dim sum bond market with a Rmb1.5bn ($239.78m) deal last week, becoming the second issuer out of four state-owned companies that were given quotas to tap the offshore investor base this year.

A number of banks have pushed their way into the CNH bond bookrunner top 10 by building on their relationships with foreign issuers and investors as the market diversifies.

The usage of dim sum bonds rather than RMB cash as a form of collateral with NYSE Euronext’s new London central counterparty is expected to gain traction due to the assets’ ample liquidity and buoyant secondary market activity.

Top 3 Offshore RMB DCM Transactions - 2012 YTD

The bank has cut its supply outlook for offshore renminbi debt issuance from Rmb240 billion to Rmb160 billion due to tighter liquidity and rising funding costs.

The Chinese central bank might have modified its foreign exchange policy to a four-month high in respond to US pressure, but this rally is unlikely to last past the US elections, say experts.

Central banks in the Middle East are increasingly diversifying reserves away from dollars in favour of CNH by buying dim sum bonds, which in turn is propping up ‘AAA’ deals in the offshore market.

The renminbi is currently moving from being a trade settlement currency to an investment and reserve currency, signaling its rapid pace of internationalisation, says HSBC.

Companies’ appetite for the offshore renminbi bond market will only gain traction if the opportunity for cost savings holds up say corporate treasurers.