Dim Sum in Dubai

Dim Sum in Dubai  

Dubai-based Emirates NBD, which is the largest bank in the United Arab Emirates, is issuing $119 million in Dim Sum Bonds. 

While the bank's issuance isn’t record breaking, it marks the first dim sum bond sale for the Gulf region and signals China's growing appetite for foreign investment.

In January, Chinese Premier Wen Jiabao visited the United Arab Emirates and signed a $5.5 billion currency swap deal to boost trade and investments between the two countries. And with Emirates NBD entrance into the dim sum bond market is a sign of China's effort to strengthen its economic and diplomatic ties with oil-rich Gulf countries.

China, the world’s 2nd largest economy, continues to be the most important market for companies looking for growth and Chinese companies continue to globalize by investing and selling their products in new markets; what is your company’s strategy for engaging China?

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What Are Dim Sum Bonds?

What Are Dim Sum Bonds?

Recently I posted a blog about “Dim Sum Bonds”

http://davidnealis.blogspot.com/2011/12/baosteel-issues-largest-corporate-dim.html

And I have had some reader feed back asking for more details on Dim Sum Bonds, so I am posting the definition from Investopedia with a link to their website for anyone who would like more information.

   

A business associate of mine, Alan Rohrbach and I were recently talking about Dim Sum Bonds and we jokingly came to the conclusion that Dim Sum Bonds are a sophisticated but light Hong Kong wrapping of an often delicious Mainland Chinese filling. Time will tell if this new delicacy continues to attract the palate of investors.

Definition of 'Dim Sum Bond'

A bond denominated in Chinese yuan and issued in Hong Kong. Dim sum bonds are attractive to foreign investors who desire exposure to yuan-denominated assets, but are restricted by China's capital controls from investing in domestic Chinese debt. The issuers of dim sum bonds are largely entities based in China or Hong Kong, and occasionally foreign companies. The term is derived from the Chinese cuisine that involves serving a variety of small delicacies and is especially popular in Hong Kong.

Investopedia explains 'Dim Sum Bond'

The dim sum bond market is still in its infancy but is expected to grow rapidly over time. As of October 2010, only $1.46 billion of dim sum bonds had been issued for the year, amounting to about 1% of $145 billion of yuan-denominated debt issued in mainland China.

http://www.investopedia.com/terms/d/dim-sum-bond.asp#ixzz1ggO2kq6A

Baosteel issues largest Corporate Dim Sum Bond

Baosteel, a Chinese SOE (state owned enterprise) steelmaker, became the first mainland company to tap the dim sum market directly when it closed a RMB 3.6 billion ($564 million USD) offshore Renminbi bond ,which is the largest corporate dim sum issue to date.

Baosteel is the largest of the three Chinese steel producers under the supervision of the State-owned Assets Supervision and Administration Commission of the State Council and was the first PRC-incorporated company to win approval from the National Development & Reform Commission to issue an offshore Renminbi bond directly in Hong Kong. 

Chinese companies and financial institutions have an overall quota of RMB 50 billion for direct issuance in the dim sum bond market this year, Baosteel is the first to issue under this quota.

The RMB1 billion two-year bond priced at a yield of 3.125%, the RMB 2.1 billion three-year at 3.50% and the RMB 500 million five-year bond at 4.375%. All the tranches priced at the tight end of guidance, which was at 3.125% to 3.375% for the two-year, 3.5% to 3.75% for the three-year and 4.375% to 4.625% for the five-year. The notes were issued at par.

The two-year bonds mature on December 1, 2013, the three-year bonds on December 1, 2014 and the five-year bonds on December 1, 2016.

Deutsche Bank and HSBC were joint global coordinators and book runners. China Merchant Securities, DBS, ICBC International and Standard Chartered were also book runners.

HSBC was ratings adviser to Baosteel and the issue was rated A3/A/A- by Moody’s/S&P/Fitch. The current rating from S&P is better compared to 2009, when it’s A-/negative rating was withdrawn.

Another factor that makes the RMB Bonds attractive to American investors is the idea that the RMB might appreciate against the US Dollar, making this not only a bond purchase but also a currency play, but what if the RMB doesn’t appreciate? We are seeing a slow down in the economy here in China and with the current cold war rhetoric coming from Washington D.C. I don’t see the Chinese being keen on moving on the RMB value very much over the next 12 months.