The Rmb100 million transaction has a three-year tenor. The deal pays a fixed rate at 3.09%. Nittan Capital Asia acted as broker on the deal.
The non-deliverable renminbi interest rate swap was developed to help corporate clients and financial institutions hedge their interest rate exposure in the Chinese currency.
ôThe renminbi non-deliverable interest rate swap has been developed by the Treasury Markets Association (TMA) to match the needs of the market, since various investors and corporates have interest rate exposure in China but may not have the required entity to access the onshore market,ö says Michael Bass, global head of rates and foreign exchange for Standard Chartered. ôHong Kong, as an international financial centre and with its unique role as the springboard for China financial markets, has a huge potential to be an offshore renminbi trading centre. Interest rate swaps are important and effective hedging tools for corporates and investors to manage interest rate exposure. Interest rate swaps and other interest rate derivatives are crucial to the development of the financial markets of Mainland China.ö
The TMAÆs market and product development committee proposed the development of the non-deliverable renminbi interest rate swap in May 2006. The Committee is chaired by Anita Fung head of global markets, Asia-Pacific at HSBC and treasurer of the Hongkong and Shanghai Banking Corporation.
ôThis is encouraging,ö says Fung. ôHSBC is the only foreign bank licensed to underwrite Chinese government bonds and we are the leader in foreign exchange turnover on the China Foreign Exchange Trading System (CFETS). This is a terrific development by the TMA in creating risk management products relevant to ChinaÆs financial markets.ö
There is just one type of benchmark for the non-deliverable renminbi interest rate swap; either utilising the onshore seven-day repo or the one-year PeopleÆs Bank of China deposit rate.
The TMA is in the process of developing a swap offered rate which it is aiming to deliver by November.
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