Singapore kicked off its challenge to
Hong Kong’s dominance of the $42 billion offshore yuan bond
market yesterday, with HSBC Holdings Plc (HSBA) and Standard Chartered
Plc (STAN) offering the city-state’s first Dim Sum notes.
HSBC sold 500 million yuan ($82 million) of two-year debt
at 2.25 percent, while Standard Chartered priced 1 billion yuan
of three-year notes at 2.625 percent after the Industrial and
Commercial Bank of China Ltd. started clearing services in the
Chinese currency in Singapore. Average yields on Dim Sum bonds,
first sold in Hong Kong in 2007, and Asian dollar corporate
securities were 3.56 percent and 3.85 percent, respectively,
according to Bank of America indexes.
Singapore has surpassed Hong Kong as a base for Asia’s
rich. The city had 91,000 millionaires with a combined $439
billion of investable assets, compared to Hong Kong’s 84,000
with $408 billion, according to RBC Wealth Management and
Capgemini SA. Hong Kong had the world’s largest offshore yuan
savings pool at 668 billion yuan at the end of March and handles
about 90 percent of China’s trade denominated in the currency,
according to Hong Kong Monetary Authority data.
“We will see Singapore become very significant in terms of
sharing the volume of yuan traded offshore,” Aaron Russell-Davison, Singapore-based global head of bond syndicate at
Standard Chartered, said in a May 27 interview. “It is a
trading city, historically mercantile by nature.”
Asean Edge
Singapore is the world’s fourth-largest currency trading
center, while Hong Kong is sixth, according to a triennial
survey by the Bank for International Settlements issued in
September 2010. The city doubled a currency-swap agreement with
China to 300 billion yuan in March.
Singapore is also part of the 10-member Association of
Southeast Asian Nations, which took up 11.6 percent of China’s
exports in April, from 9.8 percent in September, according to
the Beijing-based Customs General Administration. That’s the
fourth-largest after Hong Kong, the U.S. and the European Union.
“Singapore’s yuan clearing start is part of China’s grand
plan of internationalizing the yuan,” said James Su, who
oversees about $40 million as a fixed-income portfolio manager
at Sinopac Asset Management in Hong Kong. “From China’s
perspective, Singapore is likely to be the hub for Asean
nations.”
He added that Hong Kong will remain the dominant center due
to trade flows.
Private Bank Money
Singapore has a large pool of private bank money in U.S.
dollars, which can buy into the yuan’s appreciation, Clifford Lee, Singapore-based head of fixed-income at DBS Group Holdings
Ltd., said in a May 27 teleconference with media.
“What you see out of Singapore now, the renminbi here and
in Hong Kong, they are all fungible so they are not two separate
markets,” said Lee. “I don’t see this as a replacement or
competition in any form in terms of what Hong Kong’s role is.”
Yuan deposits in Singapore were about 60 billion yuan, Ong
Chong Tee, the Monetary Authority of Singapore’s deputy managing
director, said in June 2012. At that time, Hong Kong’s savings
stood at 558 billion yuan.
The yuan has performed the second-best among Asia’s 11
most-traded currencies this year with a 1.8 percent advance,
while the Hong Kong dollar is pegged to the greenback and the
Singapore dollar slumped 3.3 percent, according to data compiled
by Bloomberg.
Yuan Rally
China’s currency climbed to a 19-year high of 6.1210 per
dollar in Shanghai yesterday before slipping 0.02 percent today
to 6.1225. The yuan’s gain has driven a 47 basis point decrease
in the Dim Sum bond average yield this year to 3.56 percent. The
yield on China’s benchmark 10-year government bond fell 14 basis
points to 3.46 percent in the period, according to Chinabond
data.
Premier Li Keqiang signaled on May 6 that China will unveil
a plan on capital-account convertibility this year. The Chinese
currency was the 13th most-used in global payments in April,
according to the Society for Worldwide Interbank Financial
Telecommunication. On March 27, it said that Taiwan was the
world’s fourth-largest offshore yuan center excluding Hong Kong,
behind the U.K., Singapore and France.
China Economy
The cost to insure sovereign notes in China against non-payment has risen 15 basis points this year. Five-year credit-default swaps were quoted at 81.5 basis points in New York
yesterday, according to data provider CMA, which is owned by
McGraw-Hill Cos. and compiles prices quoted by dealers in the
privately negotiated market.
Premier Li indicated on May 13 that policy makers are
reluctant to use stimulus to counter a slowdown in the world’s
second-largest economy. China’s economic growth has held below 8
percent for the last four quarters, the first time that has
happened in at least 20 years.
Standard Chartered and HSBC expect the start of yuan
clearing services in Singapore to lead to more Dim Sum bond
sales as deposits rise in the city-state. Offshore yuan debt
sales in Hong Kong doubled this year to 144 billion yuan and may
reach 360 billion yuan this year, according to estimates from
HSBC.
As the offshore yuan center in Singapore develops, it will
be “more convenient for users of the currency, particularly for
issuers and investors whose cash and regional operations are
based in Singapore,” Matthew Cannon, head of global markets for
Singapore at HSBC, said in a phone interview yesterday.
Direct Trading
New Zealand and China are in talks to make their currencies
directly convertible, aiming to reduce costs as trade between
the two countries is targeted to surge by 33 percent in the next
two years. Direct trading between the yuan and the Australian
dollar started last month, making the Aussie the third major
currency to be directly convertible with China’s, following the
dollar and the Japanese yen.
“As a well-established global debt trading hub, Singapore
should be a natural center for the trading of offshore renminbi
bonds,” Jake Gearhart, Deutsche Bank AG head of global risk
syndicate for Asia in Singapore, said in an e-mail interview
yesterday. “Now that renminbi clearing is live in the city,
Singapore clearly has a unique role to play in shaping this
development, as one of the region’s primary FX, commodities and
rates trading hubs.”
To contact the reporters on this story:
Fion Li in Hong Kong at
fli59@bloomberg.net;
Rachel Evans in Hong Kong at
revans43@bloomberg.net
To contact the editor responsible for this story:
James Regan at
jregan19@bloomberg.net
Enlarge image
Singapore Hoists Dim Sum Challenge as HSBC Sells
Sam Kang Li/Bloomberg
Marina Bay Sands stands in Singapore. lured tourists. Singapore is the world’s fourth-largest currency trading center and is also part of the 10-member Association of Southeast Asian Nations, which took up 11.6 percent of China’s exports in April, from 9.8 percent in September.
Marina Bay Sands stands in Singapore. lured tourists. Singapore is the world’s fourth-largest currency trading center and is also part of the 10-member Association of Southeast Asian Nations, which took up 11.6 percent of China’s exports in April, from 9.8 percent in September. Photographer: Sam Kang Li/Bloomberg
Singapore Hoists Dim Sum Bonds Challenge as HSBC Sells
