HALISTER1: Dim Sum Issuance to Boil Up on Govt Support, More Demand: Mizuho

Dim Sum Issuance to Boil Up on Govt Support, More Demand: Mizuho

(Bloomberg) -- Chinese authorities will probably encourage more state-owned companies and local govts to issue new Dim Sum bonds as the market will otherwise quickly shrink, Mizuho Securities Asia fixed income analyst Mark Reade says.
  • Tighter onshore funding conditions in certain sectors may prompt some issuers to look at the CNH bond market; onshore funding is still cheaper for most Chinese issuers though
  • Need to get offshore investors comfortable with investing in Dim Sum bonds before full opening of the onshore market
  • Demand for the bonds has returned thanks to relatively high yields and reduced RMB depreciation concerns as USD strength has subsided
  • Mainly Chinese banks and insurance companies are buying local govt offshore bonds on significantly higher yield than onshore
  • Onshore credit spreads for weaker quality issuers have increased, but they still don’t price in appropriate level of risk
  • Yuan will stay relatively stable, partly due to dollar stability and also as China doesn’t want capital outflows to increase
  • NOTE: Offshore market has seen 197.9b yuan ($30b) of new issuance including certificates of deposit so far in 2016 vs 423.8b yuan new debt issued all last year, according to data compiled by Bloomberg
  • Related: Chongqing Liangjiang New Area Development sold CNH bond Wednesday
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Mark Reade (Mizuho Financial Group Inc)

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