Offshore RMB bond issues in first half hit 277b yuan: Singaporean banker

SINGAPORE - There were 611 offshore yuan bond issues worldwide in the first half of 2014, worth a total of 277 billion yuan ($44.6 billion), a senior executive of Singapore's DBS Bank said on Thursday.

The amount was close to the full-year total of 280 billion yuan for 2013, the bank's head of fixed income Clifford Lee told a press briefing.

In comparison, 16 billion yuan worth of offshore yuan bonds were issued in 2009, followed by 37 billion yuan in 2010, 151 billion yuan in 2011 and 173 billion yuan in 2012, respectively.

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Lee said the issues from China's Hong Kong and the mainland accounted for a combined 86 percent of the total volume in the first half of the year.

He said it is encouraging to see an increasing number of international issuers testing the offshore yuan bond market to see whether they can engage the investors.

The supply is not there yet, but "enquiries have been building up, in Singapore, in Southeast Asia, because of the developments here. We are hopeful to see more coming," he said.

Short-term issues of two or three years accounted for 84 percent of the yuan bond issues in the first half.

The funding arbitrage between the onshore and the offshore markets continued to be the driver of the yuan offshore bond market for issuers, though the growing supply is expected to reduce such arbitrage in the long run.

The banking sector accounted for 36 percent of the offshore yuan bonds issued in the first half. The relatively lower proportion shows good growth in the non-bank sector.

Lee said he does not expect the yuan to be fully convertible within the coming two or three years as Chinese authorities are expected to push the process forward at a pace comfortable for them.

"There is a lot more to do ... because now it's really regulation-driven," he said. "Whatever we see now is the beginning ... clarification of the regulations, easing up the regulations. The next step would be to ease the flows of yuan onshore and offshore. That will really really give this market a boost."

"It's the fundamental use of the yuan that's going to drive the market. The more you make it relevant in terms of the application, the fast the market will develop," he added.

Piyush Gupta, chief executive officer of DBS Bank, said at the briefing that the bank sees the yuan offshore market as an important line of business with potentials in five or 10 years.

DBS Bank has a share of around 10 percent in the offshore yuan market in Hong Kong, which is more than double its share of the overall banking market there.