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Finance Seminar Presentation 1

About Dim Sum Bonds

Junghoon Lee

on 19 January 2012

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Transcript of Finance Seminar Presentation 1

David Lee What are Dim Sum Bonds? What are Dim Sum Bonds? "Fund Managers warm to Dim Sum" Issued in Hong Kong Foreign Bonds Markets "Fund Managers warm to Dim Sum" 元 元 ¥ Panda Bond vs Dim Sum Bond Dim Sum Bonds & Other Denominated in Chinese yuan Why Invest in Dim Sum Bonds? Why Invest in Dim Sum Bonds? Expected appreciation of ¥ vs. $ Provides Broader diversification to your Portfolio For Example... Let's assume you bought zero-coupon
bonds of the U.S and the Dim Sum Bond for
$970 and ¥ 6,120.70.
Both of these bonds mature in 1 year and
their face values are $1,000 and ¥ 6,310.
(Current exchange Rate: $1 = ¥ 6.31) For Example...(continued) In this case, (when held to maturity)
YTM = HPR = 3.09%

However, if ¥ appreciated....
(New Exchange Rate: $1 = ¥ 5.99)
New HPR from Dim Sum Bond would be...
YTM = HPR = 8.52%
from a US investor's perspective, More about Dim Sum... Hit the market in 2010
Many Hedge-fund Investors Price started falling in the 2nd half of 2011
Flight to Quality (Accounting standards)
Global Financial Turmoil Current Trend Less aggressive investment from Hedge-funds

Increased investment amount from other institutional investors
Private banks, Commercial banks, Mutual funds, and Insurance Companies Growth in Size of the market Investor Diversification
(Types & Geographies) October of 2010: $1.46 Billion issued during the year 2011: ¥185 Billion ($29.4 Billion) 2012: Expected to reach ¥240 Billion Growing Investment opportunities for Individuals Mutual Funds

Exchange Traded Funds (ETF) on NYSE
Guggenheim Yuan Bond (RMB)
PowerShares Chinese Dim Sum Bond Portfolio (DSUM)
Market Vectors Renminbi Bond ETF (CHLC) Increasing number of sub-investment grade quality bonds

Quality of Borrowers (No Credit rating)

Lax accounting standards

Lack of high-quality information about issuers Potential Problems Questions Other International Bond Makets Name Issuer Country Issued In Arirang Bond Kimchi Bond Dim Sum Bond Panda Bond Yankee Bond Samurai Bond BullDog Bond Kangaroo Bond Kiwi Bond Formosa Bond Foreign Institution Korea Korea Hong Kong China USA Japan UK Austrailia New Zealand Taiwan Curreny Denominated In Won Foreign Currency Yuan Yuan US Dollar
Pound Austrailian Dollar New Zealand Dollars non-New Taiwan Dollar Is strong Yuan appreciation a good thing to China's Economy? What do you think is the trend of the Dim Sum market? Stronger or Weaker? Do you agree with the Yuan will continue to appreciate versus the dollar? Why? What is gotta happen if more and more investors turnto Dim Sum Market?
Will it be collapsed someday in the future? It is said that most of the dim sum bonds weren't rated.
What factors of those bonds attract investors to buy them? Do you think yuan bonds are superior to US bonds? Thank You! Any Other Questions? Yuan appreciated 4.72% during 2011
Yuan appreciated 7.53% during Sep. 2010 ~ end of 2011

Exchage rate vs. US dollars reached 6.30 for the first time since 18 years ago
Full transcript