Bank of America Merrill Lynch, the US bank, has launched a new index designed to track the performance of RMB-denominated offshore bonds in Hong Kong.

The Dim Sum Index covers nearly half of all outstanding RMB-denominated debt, or the Chinese currency deliverable in Hong Kong, and targets corporate, sovereign and quasi-government debt, including supranational. 

The selection criteria focus on market segments where institutional investors are interested. To qualify, a bond must be RMB denominated, at least one year to maturity at the time of issuance and a month to maturity as of the rebalancing date. It also must have a fixed coupon schedule and a minimum of RMB500 million in outstanding face value. 

The move follows the Chinese government's recent decision to relax rules governing the dim sum bond market, allowing onshore corporates and global banks to participate. As of 31 October 2011, the Dim Sum Index includes 74 bonds with exposure to eleven countries and two supranationals with a total market capitalisation of $16.2 billion. Excluded are defaulted bonds, such as synthetic bonds, CDs, retail deals, convertible bonds and securities issued with warrants attached. 

"While the total capitalization of the Dim Sum Index is still a long way off compared with the onshore China bond index, its rapid pace of growth attests to the interest it has attracted as foreign investors remain eager to gain access to China's bond markets," said Phil Galdi, head of Bank of America Merrill Lynch Global Bond Index Research.

The index is supported by nine sub-indices that segment the market by sector and is avaiable on a wide range of distibution platforms, including the BofA Merrill Lynch Global Index System.