Asia Fixed Income: Dim Sum – What is on the Menu?

As tracked by the S&P/DB ORBIT Index, the size of the offshore renminbi bond market rose 66% year-to-date (YTD) and reached CNY 280 billion*, which reflected the robust supply in 2014. And if we look at the index exposure by issue year, the new issues in 2014 represent 53% of the index.

Exhibit 1: Index Exposure by Issue Year: The S&P/DB ORBIT Index

Source: S&P Dow Jones Indices. Data as of October 22, 2014. Charts are provided for illustrative purposes

Source: S&P Dow Jones Indices. Data as of October 22, 2014. Charts are provided for illustrative purposes

While it is not surprising to see the index is dominated by Chinese issuers at 89%, there is a continuous trend of country diversification within the index. For example, some of the new index inclusions this year are Fonterra, a multinational dairy company from New Zealand and Cagamas, the national mortgage corporation from Malaysia.

There are also signs that the offshore renminbi bond market is developing into a more matured market. Bonds with longer tenors tapped into the market, i.e. the Beijing Enterprise, the Export and Import Bank of China and the Chinese government all issued with 10-year. In terms of the rating profile, 46% of index exposure is rated by at least one of international rating agencies, whereas the investment grade rated bonds account for 41% of the index.

Looking at the index performance, the S&P/DB ORBIT Index delivered a total return of 2.32% YTD, or 1.23% in USD. On the sector level, the S&P/DB Orbit Credit Index rose 2.40% YTD, which outperformed the S&P/DB ORBIT Sovereign and Quasi-Sovereign Index that gained 2.19% in the same period.

*Data are as of Oct 22, 2014.

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