Dimsum bonds appetizing again

Investors have rediscovered a liking for dimsum bonds.

This follows a drop in dimsum yields by 34 basis points this half and a further fall to 4.75% on Nov 5, the lowest since March, said Bank of America Merrill Lynch.

Investors interest in dimsum bonds is being rekindled by the renminbi, which recently rose to a 19-year high and by the Chinese Communist Party's new leader Xi Jinping who promised to "carry out reform and opening up" the economy.

International lenders are restarting renminbi or yuan debt sales after their offerings plummeted 71% last month.

Analysts said international issuers tap this dimsum market for two reasons: some have significant operations on the mainland and issue bonds to meet their funding requirements while others borrow renminbi to diversify their funding sources and swap their proceeds to other currencies.

They said a pick-up in the renminbi’s international trade volume will likely see more deposits and that will bring out liquidity and increase investors' interest.

Dimsum bonds are denominated in Chinese renminbi and issued in Hong Kong. They are attractive to foreign investors who desire exposure to renminbi-denominated assets, but are restricted by China's capital controls from investing in domestic Chinese debt.