Renminbi bonds poised for growth in Hong Kong

The progressive internationalization of the Renminbi will facilitate continued growth in Hong Kong of RMB-denominated bonds. This is according to a report released today by Moody's Investors Service.



Called "dim sum" bonds when settled in RMB or "synthetic" if settled in other currencies such as U.S. dollars, these debt instruments have so far come out primarily in Hong Kong, with several synthetic convertible bonds
in Singapore.

Dominique Gribot-Carroz, a Moody's vice president, says, "The rapidly expanding volume of Hong Kong's deposits and of trade settlements in RMB has driven growth in dim-sum bonds, and the Chinese government's recent allowance for Chinese enterprises to settle direct overseas investments in RMB will catalyze this trend."

However, the market is still at an early stage, and evolving regulations for RMB business in Hong Kong will determine the speed and sustainability of its growth.

She notes, "We have already seen a diversification in the types of issuers and issuances for dim-sum bonds, with corporate-bond tenors of three years or less, but expect the market to become more liquid, as broader participation from institutional investors leads to the development of a secondary market."As of January 14th, 2011, the total outstanding issue of dim-sum bonds remained modest, at RMB66 billion.