China XLX Fertiliser, one of the largest and most cost efficient coal-based urea producers in China, has issued a tranche of five-year Renminbi-denominated convertible bonds at face-value. They carry an annual coupon rate of 4.5% and interests will be paid on each anniversary of the original issue date of the bonds. Conversion price of the bond is fixed at RMB1.84 per share, representing a hefty premium over today’s share price at both Hong Kong and Singapore Stock Exchange.
These Renminbi-denominated bonds are called dim sum bonds in Hong Kong, named after the favourite Chinese cuisine there. These bonds are fast gaining popularity thanks to the escalating awareness and appetite of the foreign investors, who wish to gain exposure to Renminbi-denominated assets but at the same time, are restricted by the capital control policy in China.
With the uncertainty surrounding the Eurozone and US, Renminbi has strengthened 3.6 percent versus the dollar this year, and is tipped to replace US$ as the reserve currency of the world. While this remains to be seen, the demand for dim sum bond cannot be overlooked.
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