S&P and Deutsche Bank unveil offshore renminbi bond index, as interest grows in “dim sum” market

Sep 24th, 2012 | By | Category: Fixed Income

S&P Dow Jones and Deutsche Bank have unveiled the S&P-DB ORBIT Index, a co-branded index designed to measure the performance of the fast-growing offshore renminbi-denominated, so-called ‘dim sum’, fixed income market.

S&P and Deutsche Bank unveil offshore renminbi bond index as interest grows in “dim sum” market

The S&P-DB ORBIT Index measures the performance of the fast-growing offshore renminbi-denominated, bond market.

The index is based on Deutsche Bank’s existing Offshore Renminbi Bond Index Tracker (DB ORBIT), which was the first tradeable market benchmark index to provide exposure to the CNH (offshore RMB) bond market.

“The offshore RMB bond market continues to grow as the bonds are popular vehicles among offshore investors looking to gain exposure to both the yuan and debt markets in China,” said JR Rieger, Vice President of Fixed Income Indices at S&P Dow Jones Indices.  “Through our joint initiative with Deutsche Bank, we are confident that the S&P-DB ORBIT Index will serve as the key benchmark for investors looking to measure China’s offshore bond markets.”

“Deutsche Bank is proud to be partnering with S&P Dow Jones Indices, the world’s largest index provider, in the distribution of the S&P-DB ORBIT Index,” added Vishal Goenka, Head of Asia Local Currency Credit Trading for Deutsche Bank. “The offshore RMB bond market has developed considerably over the past year, with a growing range of maturities and continued diversification in issuer names.  As the market continues to deepen and attracts more sophisticated investors, transparent and independent benchmarking becomes increasingly important. The S&P-DB ORBIT Index joint venture will continue to offer investors an invaluable measure for offshore RMB bond market performance.”

The index has been designed to be a highly transparent, liquid and replicable benchmark for CNH (offshore RMB) bonds, with active two-way prices, tracking CNH bonds and certificates of deposit with a minimum issuance size of CNH 1 billion and at least 12 months to maturity.  Calculated in RMB and rebalanced on a monthly basis, the index is publicly quoted on Bloomberg (ticker: DBCNH) and is available to investors in RMB, US dollars and Hong Kong dollars.

The index will compete against rival offerings including the Citigroup Dim Sum (Offshore CNY) Bond Index, the BofA Merrill Lynch Dim Sum Index and the Bank of China Dim Sum Index. It will also likely be looked at by exchange-traded fund (ETF) providers as a possible future underlying benchmark.

Deutsche Bank’s own ETF unit, db X-trackers, has no immediate plans to launch a fund tracking the index, although is thought to be considering a potential launch in the longer term. Marco Montanari, head of db X-trackers in Asia, said: “We don’t plan to launch any ETFs listed in RMB in 2012. At the moment we are focusing on the promotion of our db X-trackers CSI 300 ETF, the only China A-Shares ETF cross-listed in Europe (London, Frankfurt, Milan) and in Asia (Hong Kong and Singapore). This ETF, although listed in USD, EUR and HKD, gives exposure to the RMB appreciation (or depreciation) because the China A-shares underlying the CSI300 index are denominated in Renmibi.”

While db X-trackers has no plans to launch anything in the short term, a number of other ETF providers have rolled out products in this space. Products include the PowerShares Chinese Yuan Dim Sum Bond Portfolio ETF (DSUM), which tracks the Citigroup Dim Sum (Offshore CNY) Bond Index; the Guggenheim Yuan Bond ETF (RMB), tracking the AlphaShares China Yuan Bond Index; and Market Vectors Renminbi Bond ETF (CHLC), benchmarked to the Market Vectors Renminbi Bond Index.

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