Yuan-clearing service ignites bond market

PHOTO: Yuan-clearing service ignites bond market

The move by a branch of the giant Chinese bank ICBC to start yuan-clearing services here on Monday ignited the bond market.

HSBC Singapore got the ball rolling with a two-year fixed rate bond offering a yield of 2.25 per cent per annum.

The bank plans to raise 500 million yuan (S$103 million) to finance its expansion of yuan-based lending assets.

Mr Matthew Cannon, head of global markets at HSBC Singapore, said: "This issuance will help open the market to other issuers looking to fund themselves internationally in Chinese yuan." He added that it will also offer new investment opportunities for the wealth-management industry here.

Besides the bond issue, HSBC Singapore has also completed a number of cross-border settlements to China and Hong Kong via the new yuan clearing facility for a number of its key commodities clients such as R1 International and Julong Group.

Standard Chartered Bank also raised 1 billion yuan through its three-year senior unsecured offshore-yuan bond issuance, with a coupon of 2.625 per cent per annum.

The bond was more than three times oversubscribed from 75 investors across Asia.

United Overseas Bank economist Jimmy Koh said in a report that ICBC Singapore's yuan-clearing business marks a significant step in making the Chinese currency a more international one.

The Chinese central bank appointed ICBC Singapore as the designated yuan-clearing bank in February.

Singapore is the first offshore yuan- clearing centre outside of China.

Mr Koh noted: "This also looks to be a test case as China pushes its offshore yuan efforts into other regions, notably in Europe as London, Paris and others vie for an offshore trading status."

StanChart chief executive Ray Ferguson said the establishment of a yuan-clearing business is a milestone in Singapore's development as a finance centre.

"Singapore already leads as a regional treasury centre; it's a springboard to South-east Asia along the key trade corridor with China and provides a hub for Asian wealth management and commodities trading. Singapore's contribution to the development of the yuan is further enhanced by this issuance," he said.

StanChart's yuan-denominated unsecured notes also represent the first bond deposited with the Singapore Exchange's (SGX) new depository services for yuan-denominated bonds, which was launched on Monday.

It will be the first offshore China-yuan bond that is listed, cleared and settled in Singapore.

The SGX said issuers and investors of yuan-denominated bonds will find a more efficient process for managing their yuan-denominated assets.

SGX chief executive Magnus Bocker said the service will complement ICBC's yuan-clearing service.

"As Singapore's role as an international offshore (yuan) centre becomes increasingly important, customers coming to SGX can be assured of our commitment to keep growing and enhancing our suite of yuan- and China-related products and services," said Mr Bocker.


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