BofA Merrill Lynch Global Research Launches Dim Sum Index

BofA Merrill Lynch Global Research (NYSE: BAC) today announced the launch of a new Dim Sum Index designed to track the performance of offshore bonds in Hong Kong denominated in the Chinese currency.

BofA Merrill Lynch’s Dim Sum Index covers about half of all outstanding debt denominated in CNH, or the Chinese currency deliverable in Hong Kong. It targets corporate, sovereign and quasi-government debt, including supranationals, with selection criteria that focus on the segments of the market that institutional investors are most interested in. To qualify for inclusion in the index, a bond must be denominated in CNH, have at least one year to maturity at the time of issuance and a month to maturity as of the rebalancing date, have a fixed coupon schedule and have at least CNH500 million in outstanding face value.

“The Dim Sum Index gives investors a comprehensive picture of the structure, risk characteristics and performance of this rapidly growing asset class,” said Phil Galdi, head of Global Bond Index Research. Since its chosen start date, December 31, 2010, the total market capitalization of the Dim Sum Index has nearly tripled to CNH103.5 billion ($16.2 billion) at the end of October 31 and the number of issuers represented has nearly quadrupled to 58. “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” he added.

The recent new rules announced by China extending the dim sum bond market to onshore corporates, relaxing rules for companies to bring renminbi funds onshore and allowing global banks to raise RMB bode well for more active participation in this asset.

“Hong Kong banks and foreign companies could be the next new source of issuers, in addition to onshore state-owned enterprises in China,” said Michele Barlow, head of Asia Pacific Credit and Convertible Bonds research. “A broader range of issuers would help add depth to this growing and important asset class.”

Index composition

The Dim Sum Index includes debt of corporate, sovereign and quasi-government issuers, including supranationals. Rebalanced monthly, the index’s constituent securities are capitalization weighted based on their current amount outstanding times price plus accrued interest. As of October 31, 2011, the index includes 74 bonds with exposure to eleven countries and two supranationals having a total market capitalization of $16.2 billion. The index is complemented by nine sub-indices that segment the market by sector.

Defaulted bonds are excluded, as are synthetic bonds, CDs, retail deals, convertible bonds and securities issued with warrants attached.

The Dim Sum Index is compiled daily and is available, along with BofA Merrill Lynch’s entire complement of over 5,000 bond indices, on a wide variety of distribution platforms, including the BofA Merrill Lynch Global Index System, which can be accessed on Bloomberg (IND<Go>), or the BofA Merrill Lynch Index website at www.mlindex.ml.com.

BofA Merrill Lynch Global Research

The BofA Merrill Lynch Global Research franchise covers more than 3,300 stocks and 1,000 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named No. 1 in the 2011 Institutional Investor All-Asia, All-China and All-Japan surveys, marking the first time a single institution simultaneously tops all three surveys. The group was also named No. 2 in the inaugural Institutional Investor Emerging Markets Equity and Fixed Income survey, covering Emerging Europe, Middle East and Africa; No. 2 in the 2011 All-Latin America and All-America Equity team surveys; and No. 3 in the 2011 Institutional Investor All-America Fixed Income, All-Brazil and All-Europe Research team surveys.

In addition, the group was ranked the No. 1 Pan-European firm for Equity Sectors Research and the No. 2 Pan-European firm for Equity and Equity-Linked Research in the 2011 Extel survey, both for the second consecutive year. The group was also the winner of the Emerging Markets' magazine EM Research Global Award for 2010 and 2011.

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