HONG KONG, July 16 BNP Paribas SA has
become the first foreign bank licensed to sell bonds directly to
Taiwanese investors through a local branch, taking advantage of
new rules aimed at making it easier for investors to buy such
The French bank began selling offshore bonds via its Taiwan
branch on Tuesday, Lillian Su, BNP Paribas fixed income head for
the country, told Reuters in an interview.
Previously, foreign banks had to market bonds to Taiwanese
investors via offshore financial hubs such as Hong Kong, making
the process cumbersome for both sides.
Insurance companies stand to benefit most from the new
rules, Su said, which allow easier access to foreign bonds that
provide higher yields than local debt.
Taiwan Power Co bonds due 2024
currently yield around 1.78 percent, for example, versus peers
in Hong Kong and South Korea whose U.S. dollar bonds of similar
maturity yield 3 percent to 4 percent.
"Given the heritage cost of the insurance policy, it's very
challenging for insurance companies to find bonds to match their
needs in the domestic market," said Su.
Insurers' total foreign investment in 2013 was around $213
billion, Su said.
Taiwan's regulators put in place stricter rules on how the
country's institutions could invest in the wake of the 2008
financial crisis, which saw many investors lose heavily on
complex structured products.
Su said banks are lobbying regulators to have insurance
companies exempted from the onerous Offshore Structured Product
"Under OSP guidelines, investors need to open an account
under a trust bank, the documentation is very heavy, and the
process is too lengthy. We wish insurance companies can be
carved out," said Su.
The latest rule change, though, reflects the dearth of bond
supplies from domestic borrowers in an export-driven, current
account surplus economy where corporations tend to be funds
The lack of opportunities in domestic issuance is driving
appetite for foreign debt instruments, which is encouraging many
fund managers to include Taipei in their Asian itinerary along
with Hong Kong and Singapore in marketing trips.
Last year, authorities allowed mainland Chinese firms to
start issuing yuan-denominated bonds or so-called "Formosa
bonds" in Taiwan, and in June this year sources said Chinese
firms will be allowed to sell more yuan bonds from the second
half of 2014.
(Reporting by Lawrence White and Umesh Desai; Editing by