Dim sum bonds, yuan-denominated debt securities issued in Hong Kong, are likely to stage a comeback in the second half of the year after becoming the weakest fixed-income investment tool so far this year, HSBC Global Asset Management Taiwan said yesterday.
As of April 30, the value of Dim Sum bonds had dropped 2.27 percent so far this year, dragged down by a weak yuan that has depreciated 3.28 percent and 3.13 percent in onshore and offshore markets respectively, HSBC assistant vice president Steven Huang (黃軍儒) said.
The bonds’ performance could turn around as long as the yuan stops depreciating amid China’s improving economic conditions, Huang said.
For the first four months, the value of Dim Sum bonds issued amounted to 300 billion yuan (US$48 billion) and could reach between 520 billion yuan and 560 billion yuan over the remainder of the year, representing a 48.57 percent increase from last year, he said.
Yuan deposits for last month gained 7.1 percent to 287.54 billion yuan in Taiwan from March, while those in Hong Kong rose 2.7 percent to 945 billion yuan in March from February, indicating that the currency remains popular, he said.
Yuan accounted for 21 percent of cross-border trade settlements in China in March, lending support to the currency’s internationalization, he added.
The recent corrections in the Dim Sum bond market reflect downside risks linked to Chinese local government debts, shadow banking and housing market uncertainty, HSBC said.
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