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Capital markets: World Bank taps dim sum

"Pricing these deals is painting with very broad strokes"

Herman Bake, Deutsche Bank

On January 4 the World Bank became the first issuer this year in the developing offshore renminbi bond market, with an Rmb500 million ($75.8 million) 0.95% fixed-rate note due 2013.

The deal, in the so-called dim sum market for renminbi-denominated debt in Hong Kong, was sole led by HSBC. While Anita Fung, head of global banking and markets Asia-Pacific at HSBC, described the deal as "a landmark issuance and another strong endorsement of [Hong Kong’s] evolving renminbi bond market," investors and bookrunners are still awaiting the issuance of a benchmark-sized deal that would help establish a pricing curve.

Speaking at Euromoney’s China debt capital markets conference in Beijing on December 16, Herman Bake, head of global risk syndicate Asia at Deutsche Bank, explained the problem. "We need to see the development of a benchmark curve. Pricing these deals is painting with very broad strokes at the moment; there is a bid but not necessarily an offer in the secondary market."

For the moment deals have been restricted to top-rated issuers such as the World Bank and selected multinationals such as McDonald’s and Caterpillar Financial, each having to be individually priced by the bookrunners based on the issuer’s outstanding debt and an estimate of the Hong Kong investor base’s hunger for renminbi-denominated paper.

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