Singapore cements offshore renminbi ambitions - FT.

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May 27, 2013 2:43 pm

By Jeremy Grant in Singapore

Singapore cemented its ambitions to become an offshore centre for the use of the Chinese currency as HSBC and Standard Chartered became the first banks to issue bonds denominated in renminbi, creating a new market in what are likely to be known as Lion City bonds. The two banks issued a combined Rmb1.5bn ($245m), with the Standard Chartered bond a Rmb1bn issue scheduled to settle first at the end of this week. Both will be listed on the Singapore Stock Exchange, which on Monday launched the first depository service for renminbi bonds as well. The moves are a culmination of steps taken by Singapore and China to create the infrastructure to allow Singapore to be used as a centre for renminbi trading as the Chinese currency continues to internationalise. Last week one of Chinas biggest state-owned banks, Industrial & Commercial Bank of China, said it would this week start clearing services for renminbi transactions in Singapore. The HSBC and StanChart bonds are the first that will be cleared under that arrangement, with DBS, southeast Asias largest bank by assets, expected to follow shortly. Matthew Cannon, head of global markets at HSBC in Singapore, said renminbi bonds issued in the Asian financial centre were likely to be known as Lion City bonds, a reference to a Sanskrit word used to describe Singapore. This would distinguish Singapore from the well-established dim sum bond market in Hong Kong. StanChart said the order book for its three-year bond, with a coupon of 2.62 per cent, was three times subscribed with interest from 75 investors across Asia. Lenny Feder, group head of financial markets at the bank in Singapore, said: In the wake of this deal, we anticipate increased interest in similar transactions from Asian companies, given the greater ease of access to and familiarity with a Singapore-based clearing and settlement system. HSBC said its Rmb500m two-year bond, yielding 2.25 per cent, would settle on June 5. It was the first renminbi bond to be priced in the Association of Southeast Asian Nations (Asean), a 10-member political and economic bloc of which Singapore is a member. This issuance will help open the market to other issuers looking to fund themselves internationally in renminbi, Mr Cannon said. Jimmy Koh, managing director of research and investor relations at UOB, the Singapore-based bank, said the two bonds were a significant milestone for the currency, since it would establish a foothold for the renminbi outside Chinas sphere of influence and into southeast Asia. This also looks to be a test case as China pushes its offshore renminbi efforts into other regions, notably in Europe as London, Paris and others vie for an offshore trading status, he added. By using ICBC as a clearing bank in Singapore, banks and those wanting access to renminbi for trading and commercial transactions can access a pool of the currency in the city state, instead of having to use custodial relationships with banks in Hong Kong to access the currency at Bank of Chinas branch there. It also allows the opening of renminbi accounts in Singapore, and the creation of a pool of liquidity in the Chinese currency, in particular for trade carried out across southeast Asia in renminbi. Currency strategists say Singapore is not likely to rival Hong Kong as an offshore renminbi centre, and is seen as a future renminbi hub for business done in the Chinese currency across Asean. About 55 per cent of Singapores external trade is intra-Asian, compared with about 20 per cent for Hong Kong, according to Royal Bank of Scotland.

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Singapore cements offshore renminbi ambitions - FT.com

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