Emirates NBD plans issue of 'dim-sum' bond

Dubai Emirates NBD, the largest bank in the UAE by assets, said Monday that it has mandated Emirates NBD Capital Limited, HSBC and Standard Chartered Bank to arrange investor meetings in Hong Kong and Singapore commencing on February 22. The bank has plans to raise funds through a CNH (offshore Chinese yuan)-denominated bond under ENBD's $7.5-billion (Dh27.52 billion) medium-term notes (EMTN) programme. The bank said the bond issue will be subject to market conditions. The issuing of offshore yuan bonds, also known as "dim-sum" bonds has witnessed massive growth over the past two years. Fixed income analysts said yesterday that if Emirates NBD succeeds in issuing the offshore CNH bonds, it will open a new source of funding for GCC companies. "The offshore yuan market is new for GCC issuers, although various global borrowers have successfully accessed it over recent months and shown that there is a decent pool of liquidity there to be tapped, if indeed the economics of the transaction work for the borrower," said Chavan Bhogaita, head of markets strategy at the National Bank of Abu Dhabi. "GCC-based issuers have certainly been looking to diversify their sources of funding, and in this regard certain financial institutions from the region have been innovative by tapping markets such as Samurai bonds, Malaysian ringgit sukuk, etc." he said. The dim-sum market tripled last year to $16.8 billion, according to Hong Kong Monetary Authority data. The dim-sum bond market really began to take off in mid-2010 after the People's Bank of China loosened its grip on the yuan. "The so-called dim-sum bonds are becoming a more common occurrence for corporates and financials globally. ENBD may well be the first from this region, but I suspect that over time you will have more," said Abdul Kadir Hussain, chief executive of Mashreq Capital. Dollar yields A big driver of both the dim-sum and dollar-bond markets this year is yields: Those on dim-sum bonds are roughly double what they were last year, while yields on dollar bonds are lower. Analysts expect a general shortage of liquidity for Gulf firms facing large refinancing requirements this year as many Western banks faced with deleveraging and balance-sheet repair will be absent from the market. Emirates NBD has more than Dh8 billion ($2.18 billion) in debt maturing this year, including $1.5 billion due in October. However, the bank said last week that the upcoming maturities are within its funding capacity. Analysts said the search for new liquidity pools is likely to lead more Gulf issuers to the dim sum market. "I think the motivation to issue in CNH is not purely price driven; I think diversifying the investor base could also be a big motivation. Chinese banks and other institutions are very liquid but could be constrained by US dollar exposure. This allows ENBD to access such investors," Hussain said. Dubai Emirates NBD announced yesterday the launch of a new gold investment account that will enable customers to buy gold in electronic form. It facilitates retail banking customers to invest in gold savings, without the additional risk and costs associated with storing and moving physical gold. Customers holding a current or savings account in dirhams or dollars at Emirates NBD can now open a gold investment account, in order to buy gold in electronic form. "The Middle East and Indian sub-continent have always had a great affinity towards gold. Given the double-digit growth rate that gold has shown in recent years, it continues to play a major role in banking wealth in the region," said Shekhar Krishnamurthy, head of retail assets and liabilities, Emirates NBD. The gold investment account is available to both individual and corporate investors wishing to invest in gold.