Emirates NBD plans Gulf’s first ‘dim sum’ bond; picks banks

Dubai lender Emirates NBD could soon issue the Gulf Arab region’s first yuan bond, reflecting the growing importance of bilateral ties with China and giving a further boost for yuan-denominated issuance in international markets. Emirates NBD, Dubai’s largest lender by market value and majority government-owned, said yesterday it had picked banks to arrange roadshows in Hong Kong and Singapore this week ahead of a potential offshore bond, a so-called “dim sum” issue. The lender announced the investor meetings days after reports it had been considering a Swiss franc issue. An official at the bank, requesting anonymity, said Emirates NBD had been weighing up both options simultaneously. “There is a big push from China to link foreign investment into UAE names. This is a sort of reciprocal exercise for that objective,” a regional debt capital markets banker said, declining to be identified. “ENBD may also be thinking about the extension of commercial banking business into China to help Chinese companies expand into Mena (Middle East North Africa) where there is a lot of rebuilding and project finance work. China has the cash and demand for oil.” There has been a consistent growth in bilateral economic and financial cooperation between China and the UAE. Last month China signed a bilateral currency swap agreement with the UAE worth 35bn yuan ($5.5bn), China’s first currency swap deal in the Middle East, in a move to boost two-way trade and investment. In the first 11 months of 2011 trade between China and the UAE grew to $32bn in value, up 38%, according to Chinese customs data. Chinese exports to the UAE, worth $24.3bn, dominated that trade. Emirates NBD would be following in the footsteps of McDonalds, Volkswagen and UK retailer Tesco, which have all issued offshore bonds issued in yuan in the last year. “While many global entities have tapped the dim sum market in recent months it remains a new market for GCC (Gulf Cooperation Council) borrowers,” said Chavan Bhogaita, head of markets strategy unit at National Bank of Abu Dhabi. “Should this deal prove to be successful, and attract strong demand, it could be significant in terms of highlighting another potential pool of liquidity for GCC issuers.” Offshore yuan bonds help international companies get access to funding from an otherwise restricted market. “The offshore renminbi market has huge lending potential. RMB is just a large underused market, and due to changing market dynamics, traditional sources of funding (for Gulf borrowers) may change,” said a Dubai-based fixed income research analyst at a top global bank. Emirates NBD has picked HSBC, Standard Chartered, and its own unit, ENBD Capital, to run the roadshows, which will take place from February 22, a company statement said. An offshore RMB-denominated bond may follow, subject to market conditions, the statement added. Meanwhile the central banks of China and Qatar earlier this month agreed to strengthen cooperation in areas including the development of their financial markets.