Dim Sum Sales Sink to 2010 Low as China Inc. Turns to Dollar

(Bloomberg) -- The Dim Sum bond market is so stuck in the doldrums that even the yuan’s best rally in nine years is failing to revive interest.

Issuers raised 86.7 billion yuan ($13.2 billion) selling the debt in Hong Kong this year, less than half of last year’s total and the least since 2010. With Panda bonds (as onshore notes from foreign issuers are known) and dollar-denominated securities both offering access to a bigger investor base, the Dim Sum market is struggling to find its footing.

“The Dim Sum market is so small that it’s difficult for companies to issue big-sized, long-dated bonds that can be easily sold in the dollar debt market," said Becky Liu, head of China macro strategy at Standard Chartered Plc. "The market will continue to shrink in 2018."

The yuan’s 6 percent surge this year should have provided global investors an incentive to buy the notes: they’ve provided a total return of 12 percent in U.S. dollar terms. But there hasn’t been much of a pickup in demand, because there’s still skepticism that the currency’s strength will last, said Liu. It was China’s unexpected devaluation that abruptly curtailed the Dim Sum market’s expansion in 2015.

Chinese firms sold $199.8 billion of dollar bonds this year, nearly twice as much as in 2016. Dim Sum securities are also losing share to Panda bonds as authorities seek to open up the mainland market, with Japanese banks the latest issuers to plan debut onshore sales. The yuan will probably remain little changed in the coming year and end 2018 at 6.55 per dollar, according to the median forecast of analysts in a Bloomberg survey.

©2017 Bloomberg L.P.