China

The challenging credit environment in most developed market economies is supporting Asian fixed income markets, particularly the dim sum bond market in Hong Kong, says Royal Bank of Scotland

The international ratings agency expects easier Chinese foreign direct investment rules to drive more offshore renminbi bond issuance and bank loans in Hong Kong.

Investors buying offshore renminbi bonds based on hopes of currency appreciation could be disappointed next year, according to analysts. The Chinese government may choose to put the brakes on any more currency appreciation when its emphasis shifts from controlling inflation to stimulating growth.

Industry sources anticipate a tough battle as fund houses scrap for R-QFII quotas in Hong Kong.

UK supermarket firm Tesco pushed open the dim sum bond market this week, raising Rmb750m ($117.3m) from a rapidly-executed debut issue at a time when other debt markets in Asia showed little sign of activity.

China Construction Bank and China Life Insurance are both considering selling subordinated bonds in Hong Kong. But even though there has not yet been a single subordinated deal sold in the dim sum market, investors are already concerned over the potential for oversupply.

Asian DCM bankers are crossing their fingers and hoping that US Federal Reserve Chairman Ben Bernanke gives the debt market a boost today (Friday) by unveiling plans to launch a third round of quantitative easing in the US. The market was on hold this week, and several bankers pointed to Bernanke’s pending speech as the reason why.

The British supermarket operator has appointed two banks to handle its first ever offshore renminbi bond in Hong Kong.

Air Liquide is poised to become the first French company to issue dim sum bonds, and has appointed four banks as its bookrunners.

Hong Kong inflation spiralled last month, but the peg to the dollar means local authorities do not have a full toolkit to fight rising prices. That will give local account holders even more reason to convert their deposits into other currencies — something that could help broaden the offshore renminbi market.

Vice premier Li Keqiang’s announcement of a series of measures to bolster Hong Kong as the only offshore renminbi centre lacked vital details.