SEOUL May 12 Yuan deposits at banks in South
Korea rose by an equivalent $2.0 billion during April to hit a
record $9.9 billion, official data showed on Monday, as
investors continued to favour the yuan's higher
It was the third-largest monthly gain on record in the yuan
deposits in South Korea, which have risen fast from late last
year mainly to earn higher returns from yuan assets, South Korea
central bank data showed.
A Bank of Korea official said the rise in yuan deposits was
expected to continue for the time being as yuan deposits still
offered at least 50 basis points higher return than won
deposits, although it gave no further details.
Media reports said last month that financial authorities in
South Korea had lifted their warning on banks to refrain from
increasing their yuan deposits, although there has been no
official announcement on the matter.
What makes yuan deposits in Seoul different from those in
Singapore or London is that the won cannot be directly converted
to yuan, making yuan deposit transactions there complicated.
Yuan deposits in Seoul were built through a structured
product scheme in which a local brokerage sold asset-backed
commercial paper to raise won from local institutions such as
The proceeds were then swapped into dollars, before they
were converted to yuan and deposited with the local subsidiaries
of Chinese banks, which then send the money back to China to
fund their operations there.
The Bank of Korea data showed all deposits in foreign
currencies including yuan rose by a net $7.3 billion during
April to reach a record $58.4 billion, the biggest monthly gain
since early 2007, he said.
More than half of the monthly gain came from deposits in
U.S. dollars, which rose by a net $4.8 billion to $42.5 billion
on increased deposits by companies for settlement of trade
bills, the data showed.
As of the end of April, U.S. dollar-denominated deposits
accounted for 72.7 percent of the total and yuan deposits for
17.0 percent, the data showed.
(Reporting by Christine Kim; Editing by Choonsik Yoo and Eric