What Is a Dim Sum Bond?
Dim sum bond’ is a slang time frame for bonds denominated in Chinese language language renminbi and issued in Hong Kong. Dim sum bonds are attractive to in a foreign country consumers who want exposure to renminbi-denominated assets, then again are restricted by means of China’s capital controls from investing in house Chinese language language debt.
The time frame is derived from dim sum, a popular style of cuisine in Hong Kong which involves serving numerous small delicacies.
Key Takeaways
- A dim sum bond refers to an RMB-denominated bond issued in Hong Kong, which is a reasonably self enough space of China.
- Dim sum bonds are marketed to foreigners who want to circumvent Chinese language language capital controls, then again nevertheless have direct exposure to renminbi-denominated assets.
- Multinational companies would most likely select to issue the ones bonds to get admission to regional financing from in a foreign country creditors without restrictions or strict oversight from Chinese language language govt.
Dim Sum Bonds Outlined
International consumers who need to participate throughout the Chinese language language renminbi-denominated (RMB) market would most likely look to the dim sum bond market. Dim sum bonds are issued in Hong Kong. SAR by means of Chinese language language and in a foreign country companies that want to avoid the stringent securities’ laws set by means of regulators throughout the Folks’s Republic of China (PRC). In numerous words, dim sum bonds are attractive to consumers all for protective debt issued in yuan, then again aren’t ready to do so as a result of Chinese language language house debt regulations.
Multinational companies, even those and not using a presence in China, can issue dim sum bonds to professional consumers without searching for approval from each PRC or Hong Kong govt. After issuing such bonds, multinational issuers would most likely use their proceeds freely in Hong Kong without PRC regulatory approval. The proceeds may also be used to settle cross-border trades.
Since PRC approval is not required, the dim sum bond market is fascinating to consumers searching for to diversify their holdings. In addition to, consumers who bet on RMB appreciation can also use the dim sum bond market. This bond market moreover allows China to regulate the amount of offshore yuan that flow once more into the mainland.
Dim Sum Bonds vs. Panda Bonds
The dim sum bond is steadily compared to panda bonds. Panda bonds instead are onshore renminbi-denominated debt issued in China by means of abroad companies. The panda bond market is used as a capital-raising platform for in a foreign country companies targeting house consumers and subsequently, house consumers are the principle customers of the ones bonds. Conversely, the offshore dim sum bond market is dominated by means of international consumers.
The Dim Sum Bond Index
The Dim Sum Bond Index is a market capitalization weighted index that measures the potency of RMB-denominated dim sum bonds issued and settled outside Mainland China. Its top 10 issuers by means of market weight were PRC, Monetary establishment of China Ltd., Lenovo Group Ltd., China Development Monetary establishment Corp., Asian Development Monetary establishment, Beijing Enterprises Group, Beijing Enterprises Water Group, Export-Import Monetary establishment of China, China Building Monetary establishment Corp., and International Finance Corp. This index is managed by means of Citigroup and rebalanced once a month.
