German industry seen as catalyst for Dim Sum bonds


* German companies including Volkswagen launched Dim Sum bonds

* European investors snapped up offerings in Hong Kong

* Opening up of renminbi market seen as chance for Frankfurt

By Andreas Kröner

FRANKFURT, April 30 (Reuters) - China's importance as an export market for Germany will help whet investor appetite for renminbi-denominated debt in Europe and could open the door for Frankfurt to take on London in the trading of so-called Dim Sum bonds, bankers and executives said.

A raft of German companies including auto maker Volkswagen , speciality chemicals company Lanxess and home appliances maker BSH Bosch und Siemens Hausgeraete GmbH have already issued bonds in China's currency.

Proceeds from these bonds are used by companies to finance expansion in China, now one of the most important markets for German industry - the powerhouse of Europe's biggest economy and the world's second-largest exporter behind China.

"For companies, growth is increasingly in Asia, this trend will also be reflected when it comes to financing," said Marc Mueller, co-head of capital markets and treasury services in Germany and Austria for Deutsche Bank.

European investors have already shown a keen interest in Dim Sum bonds issued in Hong Kong. European buyers booked 44 percent of the Lanxess offering in Hong Kong, and 26 percent of Volkswagen's 5-year renminbi-denominated bond last year.

The bond market further opened up for Europeans after British finance minister George Osborne in January signed an agreement with the Hong Kong Monetary Authority (HKMA) to make London an offshore trading centre for the renminbi. Last week HSBC announced it would price the first London-listed Dim Sum bond.

European banks including Deutsche Bank, HSBC, RBS and Standard Chartered have also started to take renminbi deposits in London, another sign that the offshore market is expanding.

Frankfurt is hoping this push for offshore bond trading will ultimately also benefit Germany.

"We are watching the events in London with interest and are also interested in emitting and trading dim sum bonds," said Alexander von Preysing, head of issuer services at Deutsche Boerse, the operator of the Frankfurt Stock Exchange.

Deutsche Boerse unit Clearstream already allows customers to hold Chinese renminbi outside of mainland China via Clearstream's Cash correspondent bank in Hong Kong.

Whether Frankfurt too will establish itself as a centre for Dim Sum bonds depends on investor appetite and upon whether the Chinese government wants to further open the market for offshore trading of its currency, von Preysing said.

An Allen & Overy survey showed the number of businesses worldwide that expect to use renminbi-denominated products is set to increase by 50 percent in the next five years.

Around 8 to 9 percent of China's trade - about $2.9 trillion in 2011 - is now settled in renminbi, a trend Beijing is encouraging as part of its efforts to internationalise its currency.

In just two years, offshore renminbi trading has grown to around $2 billion per day from zero. That is a tiny portion of the $4 trillion a day in global foreign-exchange trade, but no longer negligible.

Before 2009, the Chinese renminbi had little to no exposure in international markets because of strict government controls by the central Chinese government that prohibited almost all forms of renminbi holdings or transactions. Transactions between Chinese companies and a foreign entity would have to be denominated in U.S. dollars. (Reporting By Andreas Kroener; additional reporting by Edward Taylor and Daniela Pegna and Josie Cox, IFR Markets; Editing by Mark Potter)



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