TAIPEI, Jan 24 (Reuters) - BNP Paribas and Deutsche Bank are among potential financial firms likely to issue the first Chinese yuan bond in Taiwan, eyeing a market expected to reach 2 billion yuan this year, two sources with direct knowledge of the situation said on Thursday.
An agreement between China and Taiwan for the establishment of a clearing system for yuan transactions in Taiwan has raised hopes for local and foreign banks including BNP Paribas to tap the opportunity, the sources, who are close to the Over-the-Counter (OTC) stock exchange, said.
All renminbi bonds, which are dubbed “Formosa Bonds” in Taiwan and are an equivalent of Hong Kong’s Dim Sum Bond, will list on the OTC.
“BNP, Deutsche Bank and some Taiwan banks have been actively in contact with local regulators about issuing renminbi (RMB) bonds,” said one of the sources.
“These banks have investment need of their clients to meet,” added the source.
A bond trader of Deutsche Bank’s Taipei office said that he’s not aware of such a decision while BNP Paribas officials were not immediately available for comment.
Taiwan’s RMB bond market is expected to hit 2 billion yuan this year, about one-fifth the size of Hong Kong when it launched its Dim Sum bonds in 2007, said the sources.
China and Taiwan inked the clearing agreement in September, marking the beginning of the final stage of an economic integration that has drawn Taiwan closer to its one-time political foe and lifted trade to more than $160 billion annually.
Taiwan’s financial regulator told Reuters in an interview on Wednesday that it will ask for additional quotas to invest in China when China’s securities regulator visits next month, as cross-strait banking ties pick up pace..
Taiwan’s central bank has said that the agreement will be implemented around the Chinese New Year, which falls in February this year.
Writing by Faith Hung; Editing by Sanjeev Miglani