Suntech’s bond default crisis worries dim sum bond investors; Global Bio-Chem Technology Group recently failed to honor its liability for bonds issued in Hong Kong following a technical issue
April 19, 2013 Leave a comment
Suntech’s crisis worries dim sum bond investors
Staff Reporter, 2013-04-19
The ongoing reorganization of the debt-ridden Chinese solar power company Suntech could have an adverse effect on the Hong Kong dim sum bond market, Guangzhou’s 21st Century Business Herald reports.
The dim sum bond market refers to an offshore debt capital market for bonds denominated in the Chinese currency, the renminbi.
Many investors are increasingly concerned that Suntech’s financial troubles could signal a downward trend that may also hit the issuers of their bond investments.
The biotechnology company Global Bio-Chem Technology Group recently failed to honor its liability for bonds issued in Hong Kong following a technical issue. Though the company’s assets redeemed its bonds and avoided a domino effect in the market, many investors still fear the worst.Foreign investors have been reluctant to invest in dim sum bonds due to their lack of international ratings, the non-transparency of the issuers’ financial abilities, and their poor liquidity. Instead preferring to buy bonds issued by foreign companies or by the Chinese government, and shy away from bonds issued by Chinese companies, according to the 21st Century Business Herald.
A market analyst cited in the paper said dim sum bonds were initially launched to absorb the large quantity of overseas renminbi, but as there are now severals ways to channel the renminbi reserves back to China, the bonds have lost their appeal.
The attraction of the bonds depend largely on the credit of their issuers, therefore Suntech’s current circumstances could further dampen investors’ interest in the dim sum market, he added.
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