Praise for Dim Sum Bonds “A good 3-D view on the Dim Sum bond market—drilling down all the way from the macro factors that gave rise to this universe to the micro aspects of issuing details, while at the same time, providing a round-table perspective from the government, the issuers, the investors, and the investment banks.” —Edwin Chan, Managing Director, Head of Asian Credit Research, UBS, and No. 1 ranked analyst for Asian G3 bonds by The Asset and FinanceAsia “This book is a very useful reference for those international investors who consider investing in the offshore RMB bond market for either an apprecia- tion or a higher carry in the RMB. It is also a convenient guide to the dim sum bond market. I highly recommend treasurers of companies who haven’t tapped this important funding source read this book.” —Jingxin Deng, Director, Lead Portfolio Manager of Global Credit Investment, China Investment Corporation, Hong Kong “The dim sum bond market is not just another up-and-coming EM bond market. With the internationalization of the RMB and China being the second largest economy in the world, the dim sum bond market is quickly attracting investors and issuers from around the world. The growth (and the destiny) of the dim sum bond market, I believe, will be similar to the development of the Yankee bond market over the past 20 years. This timely and well-researched reference book written by both market practitioner and academic researchers is a must-read.” —Thomas Kwan, Head of Fixed Income, Harvest Global Investments Limited, Hong Kong “A very useful and insightful reference to anyone who wants to comprehend the profound implication of the development of the dim sum bond market and what it means to the global capital market in the future. I believe mar- ket participants and researchers will benefit from the authors’ great insights, while investors will gain from better appreciation of the risks, opportunities, and the significance of this asset class.” —Arthur Lau, Managing Director, Head of Fixed Income Asia ex Japan and Co-Portfolio Manager, Emerging Markets, PineBridge Investments Asia Ltd., Hong Kong, and voted the most astute bond investor in Hong Kong by The Asset in 2007 and 2008 “This book is essential reading for all existing and intended RMB debt mar- ket participants in Hong Kong, the biggest RMB off-shore centre.” —Philip Li, Managing Director, China Chengxin (Asia Pacific) Credit Ratings Company Limited, and former chairman of the Hong Kong Capital Markets Association “This book will help fill a gap in knowledge about the rapidly growing off- shore Chinese Renminbi market and specifically the ‘dim sum’ bond market in Hong Kong. This timely book will help investors, bankers, regulators, and academics better understand China’s currency as it becomes more inter- national and as companies look to raise funds in RMB via Hong Kong and other offshore financial centers.” —George Long, CFA, Chairman, and Chief Investment Officer, LIM Advisors Limited, Hong Kong, the founding president of the Hong Kong Society of Financial Analysts, and the founding chairman of the Hong Kong Chapter of the Alternative Investment Management Association (AIMA) “An excellent investment handbook on dim sum bonds for practitioners. The authors have great insights on the structure and evolution of the off- shore RMB bond market.” —Richard Mak, CFA, Head of Advisory Services—Asia, Pictet & Cie, and former president of the Hong Kong Society of Financial Analysts “Kudos to the authors of this book for providing a very comprehensive source of information about the development of the dim sum bond market. As buy-side investment advisors for private banking clients in Asia, we see the trend of the growing importance of the RMB in asset allocation. The burgeoning demand for offshore RMB-denominated investments is a major driving force behind the dim sum bond market. I strongly recommend this book to anyone who wants to understand the dim sum bond market.” —Maggie Tsui, Managing Director, Deputy Head of Investment Services, Asia, BNP Paribas Wealth Management, Hong Kong “The rise of China has brought its capital markets into the global limelight. The internationalization and convertibility of its currency, the renminbi, are imminent. This book provides a very timely and comprehensive study of the dim sum bond market from both a historical and risk-reward perspectives. It also provides insights into how this asset class would continue to grow and the challenges it will face along the way. Fung, Ko, and Yau’s book should be made a compulsory reading for any investor who has an interest in the renminbi and China’s offshore bond market.” —Michael Yong-Haron, CFA, Managing Director, Credit Suisse Private Banking Division, Greater China “In Dim Sum Bonds, Fung, Ko, and Yau provide a fascinating account of the dim sum bond market from relative obscurity a few years ago to a lead- ing position in the growing offshore RMB bond market. The book presents cases of the landmark dim sum bond issues, which illustrates clearly the issuers’ perspectives. This book is a must-read for anybody who wants to know this market in Hong Kong.” —Jimin Guo, Ph.D., CFA, Executive Director, China Galaxy Securities, Beijing “Fung, Ko, and Yau have done a superb job in sizing up the development of the offshore RMB bond market to date and laying out the opportunities and risks ahead. The book is an indispensable reference tool for anyone invest- ing or contemplating investing in this budding market.” —David Lai, CFA, Investment Director, Fixed Income, Eastspring Investments (Singapore) Limited “This book provides an easy-to-follow road map and delivers crystal clear details on every aspect of the dim sum bond market. It is a must-read for both seasoned professionals and novices alike.” —Lee Kerk Phua, CFA, Chief Strategist, Phillip Mutual Malaysia “Dim Sum Bonds offers insight into one of the more complex aspects of China’s efforts to become a major player in global financial markets. It ex- plains in detail the internationalization of the RMB and China’s efforts to create an alternative global reserve currency. This book is a must-read for academics and practitioners interested in understanding the remarkable de- velopments now taking place in China’s capital markets.” —Keith Ferguson, Chief Investment Officer, University of Washington, Seattle “This book is an outstanding achievement that brings the reader into the world of dim sum bonds—the offshore renminbi bond market. The com- bined practitioner and academic experience of the authors is well translated into this book that gives not only a detailed overview of the dim sum bond market, but also a thorough quantitative analysis of the bond characteristics in this fledgling market. A must-read!” —Wai Lee, Ph.D., Chief Investment Officer and Director of Research, Neuberger Berman, New York, and author of Theory and Methodology of Tactical Asset Allocation “Fung, Ko, and Yau have authored a timely reference that sheds light on a nascent yet soon to be vital financial instrument in the global marketplace. The authors address the development of the dim sum bond market and its role in supporting the Renminbi as a global reserve currency in a way that is both entertaining and informative, both in breadth and depth. Readers, whether fixed income and equity professionals or investors, will find this book a useful desk resource today and even more so as the market begins to mature.” —Derrick Tzau, CFA, International Research Analyst, Rainier Investment Management, Seattle/New York Dim Sum Bonds Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding. The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation and fi- nancial instrument analysis, as well as much more. For a list of available titles, visit www.WileyFinance.com. Dim Sum Bonds The Offshore Renminbi (RMB)- Denominated Bonds HUNG-GAY FUNG GLENN KO JOT YAU Cover image: top, ©iStockphoto.com/ngkaki; middle, ©iStockphoto.com/nicoolay; bottom, ©iStockphoto.com/beakraus Cover design: Wiley Copyright © 2014 by Hung-Gay Fung, Glenn Ko, and Jot Yau. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. 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ISBN 978-1-118-43479-6 (cloth)—ISBN 978-1-118-83964-5 (ePDF)— ISBN 978-1-118-83963-8 (ePub) 1. Bonds—China. 2. Banks and banking, Foreign—China. 3. Renminbi. I. Ko, Glenn. II. Yau, Jot. III. Title. HG4651.F86 2014 332.63’230951—dc23 2013035586 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1