Taiwan’s efforts to become a major offshore renminbi hub could be boosted this week with the market poised to see the first Rmb-denominated bonds from mainland firms.
At least Rmb8 billion ($1.3 billion) of Formosa bonds are planned and some will hit the market after Taiwan’s GreTai Securities Market issues detailed rules in the next few days, according to multiple sources.
The rules will specify conditions for issuers, said Lin Yinggui, vice-president with the GreTai Securities Market. The first batch of issuers will include large state-owned banks, as well as the mainland units of some Taiwan-based banks or enterprises, according to Lin.
It is widely believed that China Development Bank, China’s policy bank, will be the first among 20 qualified financial institutions to tap the market with a planned Rmb5 billion issue.
“It’s a milestone in converting Taiwan into an offshore renminbi center and a hub for the currency internationalization,” Lin told FinanceAsia.
Six companies have issued a total of Rmb3.9 billion of Formosa bonds in Taiwan since February, when Taiwan allowed domestic banks to undertake Rmb transactions and started bond business in the currency. However, none have been mainland issuers.
The Formosa bond market may help Taiwan gain some ground in the global offshore Rmb bond market, following moves by other markets such as Hong Kong Singapore, and London. In Hong Kong’s Dim Sum market, Chinese corporate and financial institutions represent 68% and 50% of issuance in their respective segments in 2012, according to a report from Australia and New Zealand Banking Group.
However, ANZ also believes that the Formosa bond market will primarily serve Taiwan’s domestic investors, while Hong Kong’s Dim Sum and Singapore markets will continue to cater to the global investor base because of their sophisticated infrastructure.