Yuan bond sales in Hong Kong may double in 2012 as Chinese companies take advantage of lower borrowing costs and European issuers seek alternatives to euro fundraising, the market's biggest underwriters predict.
So-called Dim Sum offerings may rise to 300 billion yuan in 2012 from 150 billion yuan this year, according to the median estimate from HSBC Holdings, Standard Chartered and Deutsche Bank, the three biggest bond underwriters. Yuan issuance by companies including Baosteel Group Corp and Air Liquide in the city exceeded sales in Hong Kong dollars by 45 per cent.
While yields on Dim Sum debt have climbed to 5.91 per cent on the Bank of China Offshore RMB Index, they're lower than the 6.56 per cent one-year benchmark lending rate and the 10 per cent yield for BBB+ rated issuers in China. Average Dim Sum bond yields jumped almost four percentage points this year as traders pared expectations for yuan appreciation and debt ratings companies raised "red flags" on corporate governance.
"Looking at issuers' expectations, we're not seeing the euphoria of the early part of this year but it is still an interesting market for a lot of international investors and issuers," Gina Tang, head of debt capital markets for Hong Kong and China at HSBC, said in a December 13 interview in the city.
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"We will see steady growth next year rather than another big step up." Sales of yuan-denominated bonds in Hong Kong have quadrupled to a record $23.7 billion in 2011, compared with $16.3 billion of issuance in Hong Kong dollars, data compiled by Bloomberg show.
The number of Dim Sum bond issuers jumped to 87, from 19 in 2010.
Average yields on Dim Sum bonds have climbed 388 basis points, or 3.88 percentage points, to 5.91 per cent this year, according to a Bank of China (Hong Kong) Ltd index.