February 9, 2012 / 7:45 AM / 5 years ago

CNH Tracker - Clearer rules herald fresh wave of bond supply

5 Min Read

By Saikat Chatterjee and Michelle Chen	
    HONG KONG, Feb 9 (Reuters) - Simplifying rules for
China-focused foreign direct investment in renminbi is
attracting a fresh wave of issuers to the offshore yuan bond
market which may end up boosting volumes to a record this year. 
    Since yuan FDI rules were announced in mid-October, a total
of 21 billion yuan ($3.3 billion) in 10 projects have been
approved until end-December, sparking a rare drop in yuan
deposits in Hong Kong banks.	
    Judging by the hectic deal flow activity so far in the
opening weeks of 2012, that wave of investment flows is expected
to flourish as more firms look at the so-called "dim sum market"
as a viable financing option for their mainland operations.    	
    At a FinanceAsia conference this week, Jeff Kwan, deputy
treasurer at MTR Corporation, which operates the
city's subway system, said the growth of the dim sum market will
save financing costs for its projects in the mainland.    	
    "We will be looking at the dim sum bond market for fund
raising options provided the funding cost is favorable to us,"
Kwan said.	
    MTR, which is building projects in nearby Shenzen, is no
stranger to the dim sum market. In June 2011, it raised one
billion yuan via a two-year bond at 0.625 percent.	
    Others like electronics giant Sony Corp are opening
offices. It opened a trading office in Hong Kong last year to
capitalise on the opportunities presented by growing trade ties
between Japan and China, Satoshi Fujioka, managing director at
Sony Global Treasury Services.	
    Trade between Japan and China has expanded by 2.5 times
since 2001 to about 26.5 trillion yen ($345 billion) in 2010,
but the amount of settlements denominated in either the yen or
the yuan remain tiny.	
    By easing the yuan trade flow process and raising funds via
the dim sum market, companies hope to bridge that gap.	
    Even as volumes picked up, new companies are tapping this
market. America Movil, for instance, became the first
Latin American issuer to sell a dim sum bond last month.	
    Sales of such bonds in January, a typically slow period,
clocked a healthy 10 billion yuan, Thomson Reuters data shows,
higher than a average of 8 billion yuan in the previous quarter,
indicating healthy demand.	
    In 2011, total sales of dim sum debt was at a record 150
billion yuan but bankers believe volumes this year may top that.
    "As more cross border channels for yuan flows develop, the
dim sum bond market becomes a viable financing option for
mainland issuers," said Tee Choon-Hong, regional head of capital
markets, North Asia at Standard Chartered Bank.      	
    * Go West... In a move to exploit closer ties between the
HKMA and the British Treasury and take pole position in the
growing offshore yuan business, HSBC appointed Paul
Gooding, a senior executive in London. The move comes after Hong
Kong and London agreed to work closer to develop the city as a
hub for offshore yuan trading last month.	
    * Standard Chartered 's yuan deposits have increased
substantially in December and January as it offers higher
interest rates on deposits, Vicky Kong, regional head of wealth
management, North East Asia, Standard Chartered said.Outstanding yuan deposits in Hong Kong banks fell by more
than 6 percent in December to below 590 billion yuan. The fall
in yuan deposits benefited Hong Kong dollars and other foreign
currency deposits which rose by nearly 1 percent each.	
    YTD dim sum bond issuance:	
    Book runner:         Proceeds (RMB mln):       # of issues:	
    1. HSBC                 4,734.0                     18 	
    2. Standard             2,670.0                      4 	
       Chartered Bank 	
    3. Bank of China        1,500.0                      1	
    4. BNP Paribas            910.0                      5 	
    5. Deutsche Bank          625.0                      2 	
    2011 synthetic RMB bond issuance:   	
    Book runner:         Proceeds (RMB mln):       # of issues:	
    1. Deutsche Bank       4,479.2                       3	
    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                1,248.5                       2 	
    * Thomson Reuters data as of February 9    	
CNH Tracker- Trade, not deposits key to offshore market growth	
BOJ deputy governor calls for greater China mkt deregulation	
More stories about the CNH market                 	
Daily onshore yuan reports                        	
Daily China money market reports                  	
Offshore yuan rate    Onshore yuan rate  	
Offshore yuan dealt Onshore yuan on CFETS 	

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