Pacific Investment Management Co (PIMCO) sees a boom this year in issuance outside China by Chinese companies, driven by a record amount of Dim Sum bonds set to expire and a cash crunch in domestic markets.
Offshore yuan notes maturing this year, excluding certificates of deposits, will more than double to 91.1 billion yuan (US$15.1 billion), according to data compiled by Bloomberg.
The 3.95 percent average yield on Dim Sum bonds compares to a record 6.29 percent onshore and the 4.76 percent for dollar securities in Asia, according to Bank of America Merrill Lynch indexes that track yuan data since 2004.
Photo: Reuters
“A lot of local and Dim Sum bonds are coming up for maturity so there will be a lot of refunding needs,” said Raja Mukherji, the Hong Kong-based head of Asian credit research at PIMCO, manager of the world’s biggest bond fund. “Given that onshore rates have been ticking up in China, corporates may choose to go to the offshore bond markets and extend their maturity.”
Dim Sum bond issuance last quarter surged to the highest in more than two years and the offshore yuan climbed to a record on Thursday in Hong Kong as Chinese Premier Li Keqiang (李克強) accelerates efforts to ease currency controls and boost convertibility.
By contrast, onshore yuan issuance fell to the lowest since the first three months of 2012 as the world’s second-largest economy experiences the worst cash crunch since June last year.
The offshore yuan advanced 0.13 percent to 6.0492 per US dollar as of 5:01pm on Thursday in Hong Kong, data compiled by Bloomberg show.
It earlier touched 6.0448, the strongest level in data going back to August 2010.
People’s Bank of China Deputy Governor Yi Gang (易綱) wrote in a article on Wednesday that the nation will expand the opening up of its foreign-exchange market and expand its participants.
US dollar borrowing costs for companies in Asia rose 89 basis points last year, after the US Federal Reserve said it would reduce its bond purchases.
Average yields on offshore yuan notes fell 7 basis points in the same period, Bank of America Merrill Lynch data showed.
“Supply of Dim Sum bonds will increase in 2014 because of the refinancing needs, cost advantage over onshore and renminbi internationalization,” said Raymond Gui, a Hong Kong-based senior portfolio manager at Income Partners Asset Management, which oversaw US$1.4 billion in assets as of June last year.
“US dollar yields have been climbing these days, so I don’t see much cost advantage of dollar funding over Dim Sum for Chinese names,” he said.
In Shanghai, the yuan closed 0.05 percent higher on Thursday at 6.0506 against the greenback, China Foreign Exchange Trade System prices showed.
It earlier reached 6.0500, the strongest level since the government unified the market and official exchange rates at the end of 1993.
The seven-day repurchase rate, a gauge of interbank funding availability, averaged 5.16 percent last month, the highest since June, according to a daily fixing rate announced by China’s National Interbank Funding Center.
Last month’s cash crunch in the interbank market, the worst since June, is forcing Chinese companies to offer bonds at the highest yields since the 1997 Asian financial crisis.
Evergreen Holdings Group Co, an “AA-” rated shipbuilder with 16.5 billion yuan of debt, sold one-year notes at 9.9 percent on Dec. 6, the highest among publicly issued onshore bonds since 1997, according to data compiled by Bloomberg.
Intel Corp chief executive officer Lip-Bu Tan (陳立武) is expected to meet with Taiwanese suppliers next month in conjunction with the opening of the Computex Taipei trade show, supply chain sources said on Monday. The visit, the first for Tan to Taiwan since assuming his new post last month, would be aimed at enhancing Intel’s ties with suppliers in Taiwan as he attempts to help turn around the struggling US chipmaker, the sources said. Tan is to hold a banquet to celebrate Intel’s 40-year presence in Taiwan before Computex opens on May 20 and invite dozens of Taiwanese suppliers to exchange views
Application-specific integrated circuit designer Faraday Technology Corp (智原) yesterday said that although revenue this quarter would decline 30 percent from last quarter, it retained its full-year forecast of revenue growth of 100 percent. The company attributed the quarterly drop to a slowdown in customers’ production of chips using Faraday’s advanced packaging technology. The company is still confident about its revenue growth this year, given its strong “design-win” — or the projects it won to help customers design their chips, Faraday president Steve Wang (王國雍) told an online earnings conference. “The design-win this year is better than we expected. We believe we will win
Chizuko Kimura has become the first female sushi chef in the world to win a Michelin star, fulfilling a promise she made to her dying husband to continue his legacy. The 54-year-old Japanese chef regained the Michelin star her late husband, Shunei Kimura, won three years ago for their Sushi Shunei restaurant in Paris. For Shunei Kimura, the star was a dream come true. However, the joy was short-lived. He died from cancer just three months later in June 2022. He was 65. The following year, the restaurant in the heart of Montmartre lost its star rating. Chizuko Kimura insisted that the new star is still down
While China’s leaders use their economic and political might to fight US President Donald Trump’s trade war “to the end,” its army of social media soldiers are embarking on a more humorous campaign online. Trump’s tariff blitz has seen Washington and Beijing impose eye-watering duties on imports from the other, fanning a standoff between the economic superpowers that has sparked global recession fears and sent markets into a tailspin. Trump says his policy is a response to years of being “ripped off” by other countries and aims to bring manufacturing to the US, forcing companies to employ US workers. However, China’s online warriors
RSS