CNH Tracker-After Nigeria, Brazil may be next to diversify into yuan

By Saikat Chatterjee

HONG KONG, Sept 15 (Reuters) - Brazil may follow in
Nigeria's footsteps and diversify its foreign exchange reserves
into yuan, which would bring more sovereign demand into the
offshore renminbi market.

Nigeria's central bank governor Lamido Sanusi said Africa's
second-largest economy will start holding yuan as part of its
reserves from the next quarter, an allocation of as much as 10
percent, and will look at investment opportunities in the
offshore yuan market.

The African nation's decision was not taken overnight. Over
the years, trade ties between China and Nigeria have
strengthened dramatically and annual trade between the two is
set to cross $13 billion this year alone, a four-fold increase
from 2006. It was relatively non-existent before 2000.

About 15 percent of all its imports are from China and the
bulk of its oil exports, of which it is a major producer, goes
to China. China has invested billions of dollars in developing
refineries, ports and telephony infrastructure over the years.

As a result, Nigeria is among the top five export markets
and trading partners of the Middle Kingdom in Africa and small
wonder that its authorities want to reduce the reliance on
dollars and euros as invoicing currencies for trade.

Next to follow may well be the economic powerhouses of Latin
America.

- According to a study done by Gavekal strategists Will
Freeman and Benjamin Lopez, trade between China and Latin
America has grown faster than any other two major regions in the
last decade.

- Latin America is China's biggest supplier of primary
commodities, excluding fuel. Mining giant Vale -- the
world's biggest producer of iron ore -- counts China as its
single biggest customer.

- From 2000-2010, China's share of Latin America's trade
jumped to 10 percent from 2 percent and the Middle Kingdom is
the top trading partner for two of the most developed nations -
Brazil and Chile.

- Last week, a Chinese group of five state-owned enterprises
paid $1.95 billion for a 15 percent stake in Brazilian niobium
producer, Companhia Brasileira de Metalurgia e Mineracao (CBMM),
the world's top niobium producer.

- About $23 billion in foreign direct investment deals was
announced in 2011, Gavekal said citing the U.N. Economic
Commission for Latin America. Total foreign direct investment
was a mere $7 billion between 1990-2009.

With China finding itself in a strong financial position
compared to the West, Lamido Salusi, Nigeria's central bank
governor told Reuters the move to diversify into yuan is," a
very wise move at this point in time and forward looking."

Brazil, which sits on top of a $352 billion reserves pile
would certainly think about that.

WEEK IN REVIEW:

* Norman Chan goes to the West. After Russia, London was the
next destination for the top brass at the Hong Kong Monetary
Authority to tout the territory's premier status as the offshore
yuan hub and to support the development of yuan business in
London. In 2010, about 30 percent of China's external trade was
intermediated through Hong Kong, and nearly 60 percent of
China's inward and outward direct investments were originated
from or directed to Hong Kong, Chan who heads Hong Kong's
central bank said.

* Malaysian government investment arm Khazanah Nasional will
meet investors in Hong Kong and Singapore next week for an
offshore renminbi sukuk in Hong Kong, marking the first Islamic
financing instrument denominated in yuan. Bank of China
International, CIMB Bank and Royal Bank of Scotland are
the bankers to the deal.

* In other deals this week, Korea Development bank sold its
debut 121 million yuan offshore renminbi bond at 1.6 percent
while Citic Bank International closed a one-year 500 million
certificate of deposit issue at 1.6 percent.

* Saxo Bank, an online trading and investment house, said
clients can now trade the offshore yuan (CNH) on its platforms.
Prices for ticket sizes up to USD 3 million will be available
during regular FX trading hours from 8 a.m. Mondays Sydney time
to 5 p.m. Fridays New York time. The margin requirement is 8
percent and the minimum trade size is $5,000 notional.

* HSBC Bank (Taiwan) obtained approval from Taiwan's
regulators to offer yuan products and services to customers in
Taiwan from next week. The license allows the bank to offer a
range of yuan-related services and products including deposits,
remittances, FX, trade, investments, loans and receivables
finance amongst others. Taiwan along with Singapore are vying to
be the next offshore yuan centers after Hong Kong.

CHART OF THE WEEK:

Chinese trade in yuan surges: link.reuters.com/xyh73s

Trade denominated in yuan has grown from strength to
strength since the landmark reforms last July. As a percentage
of total trade, yuan transactions are set to cross the 20
percent mark by the year end, though most of them are imports.

LEAGUE TABLES

YTD dim sum bond issuance:

Book runner: Proceeds (RMB mln): # of issues:

1. HSBC 27,004.0 52

2. Standard 15,934.3 33

Chartered Bank

3. RBS 7,178.5 17

4. Bank of China 7,150.3 10

5. Deutsche Bank 7,027.6 12

YTD synthetic RMB bond issuance:

Book runner: Proceeds (RMB mln): # of issues:

1. Deutsche Bank 4,679.2 4

2. Citi 2,912.5 2

3. Bank of China 2,312.5 1

4. Bank of America 2,312.5 1

Merrill Lynch

5. HSBC 1,748.5 3

* Thomson Reuters data as of September 15

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r.reuters.com/xyz72s
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(Additional reporting by Nethelie Wong with IFR and Lucy
Hornby; Editing by Kevin Plumberg and Ramya Venugopal)