Russia Leading China In Dim Sum Bond Market: Report
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Russian companies this year have raised more money via the offshore renminbi debt market as compared to their Chinese counterparts, reported the Financial Times on Monday, highlighting the growing appeal of the dim sum bond market as a cheap source of funding for emerging market borrowers.
Russian companies this year have raised more money via the offshore renminbi debt market as compared to their Chinese counterparts, reported the Financial Times on Monday, highlighting the growing appeal of the dim sum bond market as a cheap source of funding for emerging market borrowers.
According to FT, four Russian companies – all banks – have thus far issued roughly $482 million in dim sum bonds this year, compared to just $477 million by Chinese companies.
The year’s top issuer of dim sum bond however remains Hong Kong, who has raised over $652 million in three deals.
[quote]“The issuers have found cheap funding, and at the same time walked away with new investors [for their debt],” said James Fielder, head of Asian local currency syndicate at HSBC, to FT.[/quote]“They will be able to come back to the market in the future to continue to obtain funding in what they deem as a fast growing and increasingly important market,” he added, noting that that current borrowing costs in the dim sum market were at “the sweet spot” for BBB-rated emerging market issuers, while also offering attractive yields for investors.
Russian Agricultural Bank, which is BBB-rated, issued a three-year dim sum bond last month with a yield of 3.6 percent. Comparatively, their most recent U.S. dollar bond, issued last summer, paid a coupon of 5.3 percent.
Among the top four Russian banks, Sberbank is the only one yet to tap the Dim Sum market, although there were rumours last week that it might be looking too.
[quote]“It is a bit tricky for Sberbank as other Russian banks have offered good pick-ups. But Sberbank, as the largest bank in Russia, should not pay that much, hence its issue may be less attractive for yield-hungry investors,” said a banker to IFR Asia.[/quote]In total, companies worldwide raised a combined $1.2 billion through the dim sum market last month alone, making it the busiest month for corporate issuance since March 2012. The news dispelled fears that investors were shunning the market, on mounting concerns about the Chinese economy.
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Analysts are hopeful that 2013 will see a further rebound, on the back of fresh enthusiasm for China, improving market liquidity, and more attractive yields.
“We’re already seeing interest pick up a bit in higher yielding [dim sum bonds] where investors see potential for a nice return over two to three years,” said Jon Pratt, head of debt capital markets Asia at Barclays, in a separate FT article earlier this month.
[quote]“The coupon you can get in fairly safe investment grade paper is actually quite attractive compared to other emerging market paper,” added Jack Chang of ICBC investment management in Hong Kong. “We think the current income and the long-term appreciation stories are still there,” he said.[/quote]Last year, Chinese issuers dominated the market, responsible for more than 50 per cent of the funds raised, while Russian companies completed just one deal.
