Greater China

Demand for rated corporate names means sukuk borrowers will find a good reception on the dim sum bond market but a lack of natural appetite for the renminbi could hamper deals flow.

Foreign banks are pitching hard to bring more Indian banks to the Singapore dollar market, after a S$250m ($203m) deal from Export-Import Bank of India proved that a recent market-opening trade from IDBI Bank was not just a one-off.

Singapore’s Ezra Holdings returned to its local investor base last week, raising S$150m ($121.3m) only a week after selling its first deal in more than two years. But on its second visit to the market the company pushed for a more aggressive structure, closing a corporate hybrid that adds to a stream of supply in the market this year.

Banks and issuer in Taiwan look set to become a bigger feature of the dim sum market as regulator plans to drop restrictions.

Korea Development Bank became the first lender from the country to tap global investors after last week’s ratings upgrade of South Korea pushed down spreads and created tempting funding opportunities. KDB raised Rmb600m ($94.5m) from a tap of its dim sum bonds, and quickly turned to the dollar bond market once that deal was closed.

Bankers are upbeat about the prospect for dim sum bonds after Société Générale’s deal last week highlighted the savings that issuers could make in this market. But before getting too excited, bankers need to take a closer look at the depth of the cross-currency swap market.

Got lots of renminbi? Don’t know what to do with it? Well, if the example of one company is anything to go by, M&A could be one way to put the currency to good use.

Now the initial praise for the CNT market has died down, the market is grappling with questions around spot rate arbitrage, renminbi liquidity and what this means for London and Singapore.

Top 3 Offshore RMB DCM Transactions - 2012 YTD

The continued trend of tightening CNH liquidity since the start of the year could lead to the selloff in FX swap-funded dim sum bonds, believes Deutsche Bank.

Société Générale’s offshore renminbi bond last week was priced some 48bp tighter than the French lender’s outstanding dollar bonds, after a big drop in the cost of swapping renminbi into dollars.