Pension funds said to eye ‘dim sum’ exposure

04 June 2014   Category: News, Asia, China, Global, Hong Kong, Singapore   By Derek Au

Asian institutional investors such as pension funds will seek to increase their exposure to RMB denominated bonds this year, according to a senior executive at Bank of China (Hong Kong) Asset Management.

Speaking to Asia Asset Management, managing director and head of fixed income Ben Yuen said that pension funds were taking an increase interest in ‘dim sum’ bonds issued in Hong Kong and Singapore.

“Especially this year, we’ve seen lots of pension funds studying [dim sum bonds]. I will not be surprised if some of them enter the market this year.” Mr. Yuen declined to put a figure on the value of assets that could be placed on these products, but said that their perceived low risk amid high volatility in financial markets was enticing to institutions.

Issuance of offshore RMB bonds has taken off in the last three or four years, he said, but as of yet has not drawn major interest from pensions funds.

The findings of a report by the bank, alongside indexing provider FTSE, published last week, anticipated that new issuance of offshore RMB bonds will surge this year. It noted that issuances worth 116 billion RMB (US$18.57 billion) were due to mature this year, and would need to be refinanced.

The report also said that lower spreads versus the Mainland offshore market would encourage China’s state-owned enterprises to issue RMB bonds in Hong Kong this year.