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Chinese internet giants are ramping up their issuance of Hong Kong–denominated bonds, known as dim sum bonds, amidst growing investments in artificial intelligence.
Tencent Holdings announced on September 23 that it plans to issue three bonds denominated in Chinese yuan on the Hong Kong Stock Exchange, totaling CNY9 billion (about USD1.3 billion). This marks Tencent’s inaugural plan to issue dim sum bonds. The offerings include a CNY2 billion, 15-year note with a 2.1% annual interest rate; a CNY6 billion, 20-year bond with a 2.5% rate; and a CNY1 billion, 30-year bond with a 3.1% rate.
On September 15, Baidu issued a CNY4.4 billion yuan-denominated bond in Hong Kong, marking its first dim sum bond issuance this year. Alibaba Group last November issued its initial CNY17 billion (approximately USD2.4 billion) dim sum bond.
With artificial intelligence gaining global momentum, tech companies are experiencing a surge in capital spending. An industry insider explained that dim sum bonds are becoming an increasingly attractive option for financing such investments due to their relatively low costs.
International operations for internet firms create a significant demand for offshore debt financing. According to the fixed-income research team at Shenwan Hongyuan, the offshore Chinese yuan bond market is expected to continue expanding as the southbound trading route of the Hong Kong–mainland stock connect broadens. This development is likely to lead to an acceleration in dim sum bond issuance by internet companies.
As of September 18, roughly CNY771.4 billion (around USD108.1 billion) worth of dim sum bonds have been issued this year, representing an 11% decline compared to the previous year. However, since August, the issuance volume has picked up noticeably, approaching CNY200 billion over the last two months.
Due to the Federal Reserve’s rate hikes and the inverted interest rate spread between China and the United States, the financing costs for dim sum bonds remain lower than those for U.S. dollar bonds, according to Zhang Jiqiang, director of Huatai Securities Research Institute and chief fixed-income analyst.
In recent years, some local government financing vehicles have shifted toward issuing dim sum bonds, driven by increased regulatory scrutiny of domestic financing activities. Nonetheless, most bond issuers remain concentrated within banks and local government financing entities, with fewer issuances coming from other sectors, Zhang added.
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