HONG KONG, Aug 4 (IFR) - Despite the weak outlook for global
fixed-income trading, investment banks in Hong Kong are hiring
more credit traders to take advantage of the thriving market for
Greater China debt.
Several local and international firms say they are devoting
additional resources to the fast-growing offshore renminbi bond
market to build an early foothold in the promising secondary
market for the so called Dim Sum securities.
"We have done several Dim Sum new issues recently, and we
believe that market is growing," said Anitza Nip, head of flow
credit trading, Hong Kong, at National Australia Bank. "We make
markets for the issues we do and are planning on rolling
out a full secondary CNH trading platform as soon as this year."
More bonds were sold in the offshore renminbi market in the
first half of 2014 than in the entire previous year, according
to Thomson Reuters data. HSBC, the top arranger of offshore
renminbi debt offerings, expects sales of new bonds and
certificates of deposit to total Rmb520bn-Rmb570bn
(US$84bn-$92bn), up from about Rmb371bn in 2013.
That pace of growth is alluring for banks in the region.
"While the liquidity in the Dim Sum market has still a long
way to go to reach the G3 markets, the management is very keen
to maintain our edge in this market," said a Hong Kong-based
rates and foreign-exchange trader, whose investment bank
recently moved a credit derivatives analyst to Dim Sum trading.
Many Dim Sum issues are still too small to be actively
traded by the world's biggest credit funds, but bankers note an
increase in overseas interest for the securities.
"We are seeing more investor queries from various quarters,
even outside the region, when it comes to China fixed income,"
said Vishal Goenka, head of local currency credit trading, Asia
at Deutsche Bank based in Singapore.
China has stepped up efforts to promote the use of its
currency overseas in recent months, designating clearing houses
for the renminbi in global financial centres such as London,
Frankfurt and Paris and relaxing restrictions on cross-border
flows both into and out of China.
This has helped stimulate demand for securities denominated
in the Chinese currency.
"Compared to a few years ago, liquidity in the CNH market
has improved a lot, the pool of money available has increased,
and the push for the internationalization of the renminbi has
intensified," NAB's Nip said. "More and more European funds, as
well as others, have expressed interest in CNH. The market is
developing - I would say - developing fast."
Still, banks and brokerages are taking a cautious approach
to beefing up their Dim Sum trading platforms. The global
fixed-income outlook remains bleak, with low market volatility
weighing on secondary-market turnover and tougher capital rules
limiting banks from holding large fixed-income inventories.
"When we see more [consistent issuance] leading to deeper
markets, we will see more investor participation and that would
see market trading beef up," said one head of Asian fixed
Still, his firm and others are acting on their positive
expectations for the market segment.
"We are putting resources in. It may be too early yet to put
folks on Dim Sum trading full-time, but the trend is definitely
Chinese companies are increasingly turning to the overseas
markets to raise funds for expansion, and bankers expect this
growing use of foreign funding to lead to greater demand for
specialist China fixed-income trading.
China, Hong Kong and Taiwan account for 52% of all US dollar
bonds sold so far this year from Asia, excluding Japan and
Australasia, according to Thomson Reuters data.
At US$62bn, 2014's tally of US dollar bond issues from
Greater China is already an annual record. That figure has
surged more than six times since 2009.
Arrangers need to support those debt issues for their
Chinese clients by providing liquidity in the secondary market,
while a greater volume of Chinese bonds outstanding means there
are more opportunities for traders to exploit.
"While low volatility now means turnover is low, China fixed
income is attractive for a bunch of reasons, and it is only set
to grow if you take the 10,000 feet up in the air perspective,"
said Deutsche's Goenka.
(Reporting by Timothy Sifert and Saikat Chatterjee. Editing by