Invesco, Azimut and others meet Italian demand for ‘Dim Sum’ bonds
Despite lagging investment trends in London, Italian institutions and privates have definitely turned their attention to bond funds denominated in Chinese renminbi, otherwise known as ‘Dim Sum’.
On the back of growing investors’ interest and appetite, asset managers are developing their offering to tap into the new business of yuan-denominated bonds, issued for the first time outside Hong Kong in April 2012.
Only a few months ago in London, HSBC became the first business to issue a RMB1bn benchmark bond, as UK chancellor George Osborne took steps to turn the UK financial centre into the first Western trading hub for the renminbi.
And the appeal of ‘Dim Sum’ bonds has definitely extended to other European markets. Although Asian institutions still dominate the $10.2bn market, European companies and banks have recently expanded issuances in offshore yuan bonds, increasing liquidity on the market. Recent issues include ABN Amro Bank NV and Société Générale, which both priced a RMB500m bond at the end of August.
Beneficial sovereign bonds
In Italy last month, Invesco announced the launch of a renminbi fixed income fund for Italian investors, which invests a minimum of 70% of its assets in renminbi products.
Giuliano D’Acunti (pictured), head of retail distribution for Italy at the company, says: “We think the Italian market will specifically benefit from Chinese sovereign bond investments. Today, it’s impossible to think of a portfolio that has an exposure of less than 4% or 5% to the Chinese currency, which is set to become the global currency over the next 10 years.”
Mario Baronci, head of fixed income and absolute return at Sella Gestioni, agrees.
“Looking ahead, China will become the biggest world economy, and will have the greatest currency reserve. The chances are high that when its currency is freely convertible it will follow the performance of German mark and Japanese yen,” he says.
At the moment, returns on renminbi bonds are the lowest in the BRIC (Brazil, Russia, India, China) region and, according to Baronci, those investments are linked to expectations of a future appreciation. “Moreover, for those who rely on optimisation models, the low volatility has a great attraction,” he adds.
For Italian investors, the easiest way to gain exposure to the currency is to look for a specialised fund. “Expectations for the development of a new offshore market in London are high. We can call it a euro/renminbi market, similar to the euro/dollar market developed in the UK during the 1980s. There are several similarities,” Baronci says.