By Dr. Sean Chang, Head of Asian Debt Investment – Baring Asset Management (Hong Kong)
The Dim Sum bond market – bonds issued outside of China but denominated in Renminbi (RMB) – will become a global trend.
After Hong Kong, Singapore, London and Taiwan, we will soon see ‘dim sum’ markets grow and develop in Paris, Germany, Luxembourg, South Korea and Australia.
It is clear that RMB will soon be the next global currency. As such, Dim Sum bonds are going to be one of the major developments in the bond market. Dim Sum bonds will mark the next milestone in the global fixed income market after the Eurobond (foreign currency bond issued externally, not Euro currency bonds) market created in the 1960s.
The Dim Sum bond market is very exciting – as exciting as the development of the onshore Mainland market – because it is makes RMB-denominated bonds accessible to foreign investors. The initiatives by China’s central government and regulators to promote and open up RMB currency clearing houses will make RMB bond trades easier and more accessible than ever.
Hong Kong is still the major offshore RMB hub, with most of the offshore RMB bonds issued and distributed in Hong Kong and to the region. China enterprises and foreign companies still find Hong Kong the most convenient financial centre to issue Dim Sum bonds, with part of the reason being that Hong Kong has almost 10% of its deposit base in RMB currency. This is due to the deregulation from the Mainland and the privilege granted to Hong Kong for it to accumulate RMB currency from trades and other related transactions using RMB currency.
Sri Lanka will definitely want to tap further into the Dim Sum market for financing and funding. This could also grow Sri Lanka’s profile as a major financial centre in Southern Asia.