Yuan Bonds Gain Nicknames Overseas: WSJ Asian cities keen to grab a slice of the booming offshore yuan market are coming up with imaginative names to label new types of debt in the Chinese currency. First came dim-sum bonds in Hong Kong in 2007, named after the bite-size delicacy thats popular in the city. Now, Taipei is keen to call yuan bonds sold there Formosa bonds, named after Taiwans former name which translates as beautiful island. In Singapore, its Lion City bond, referring to the city-nations lion head symbol. It can be confusing for investors, especially those from outside Asia, but they are all yuan-denominated bonds issued outside mainland China. The market started in full swing three years ago when Beijing lifted restrictions on the yuan to allow it to trade in Hong Kong, a designated pilot hub for Chinas grand plan to promote the global use of its currency. Chinas policy banks, state-owned enterprises and multi-national companies like McDonalds Corp. and Caterpillar Inc. issued the first few international yuan bonds in Hong Kong. The fast growth in the market has prompted more cities to strive to become yuan hubs, and with it these new nicknames to dilute peoples strong perception that Hong Kong is the only place to issue and buy yuan bonds. For now, Hong Kong remains dominant in offshore yuan trading and bond issuance. But other markets such as Singapore, Taiwan and London are gaining market share following Beijings effort to bolster the yuans global use. While London has issued yuan bonds, bankers have avoided promoting a new name for fear of further confusion. Last week, the biggest Chinese bank by assets Industrial & Commercial Bank of China Ltd. had its Singapore branch issue 2 billion yuan (US$328 million) worth of yuan bonds -- the biggest bond of its kind ever issued in the lion city. In Taiwan, major mainland Chinese lenders including Bank of Communications Co. and Agricultural Bank of China Ltd. are crossing the strait to the sell their first Formosa bonds there. Fierce competition between global financial cities for a position in yuan trading comes as the Chinese currency, officially known as renminbi, rose to become the eighth most used currency in the world in August, up from 11th in January last year, according to the Society for Worldwide Interbank Financial Telecommunication, or Swift, a global financial information services provider. Bankers say that all the yuan centers will each have a bite in the growing pie, and all the individual nicknames will perhaps ultimately fade away. When the size of each yuan bond grows bigger over time, even its most popular name--dim-sum bonds--may not be appropriate, some bankers say, as it might not be only a bite-sized dish any more.
Posted on: Thu, 28 Nov 2013 05:30:00 +0000
Trending Topics
Recently Viewed Topics
© 2015