HSBC says the entire dim sum bond market will benefit from continued capital inflows to emerging markets and bullish currency outlook. In relative terms, those issued by the Chinese government and in investment grade, are preferred to high yield dim sum bonds, the house says. "CGB (China government dim sum bond) is more attractive to fast money investors thanks to its good liquidity. In other words, we believe CGB is the best place to be if most of the capital inflows turn out to be short-term 'hot money'." Among investment-grade issues, HSBC believes longer-dated papers, with tenors of 5-7 years, will outperform those with a maturity of 3-5 years, as they have been laggers in terms of yield tightening and because of limited supply. As for high yield dim sum bonds, HSBC says they have become more expensive after rallying in the past 6 months, and therefore will likely underperform going forward.
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