HSBC: dim sum debt sales could reach HK$448bn in 2013

HSBC expects China's new leaders to push greater use of yuan from London to Taipei

PUBLISHED : Wednesday, 19 December, 2012, 12:00am
UPDATED : Wednesday, 19 December, 2012, 2:37am

Sales of dim sum debt may reach 360 billion yuan (HK$448 billion) next year as China's new leaders encourage use of the yuan in financial centres from London to Taipei, HSBC predicts.

Yuan bond and certificate of deposit issuance outside the mainland will rise from 263 billion yuan in the first 11 months of this year as cross-border trade settlement in the currency increases, HSBC, the leading underwriter of such debt, says.

Yields on dim sum debt have dropped 88 basis points since the end of last year to 4.64 per cent, according to a Bank of America Merrill Lynch index. That compares with an average yield of 2.61 per cent for firms worldwide.

Last week's approval for Bank of China's Taipei branch to clear trades in the currency and China Construction Bank's dim sum debt sale listed in London last month shows regulators are supporting the expansion of the global use of yuan beyond Hong Kong. Singapore, and possibly London, may also be permitted to clear yuan next year, Deutsche Bank analysts wrote last month.

"We're optimistic and are expecting a decent market next year," said Gina Tang, head of debt capital markets for Greater China at HSBC.

"The further growth of the offshore renminbi market and development in other centres including London and Taipei is actually beneficial for Hong Kong, as we will continue to be well positioned as the centre of most of the business."

Issuance of dim sum bonds and certificates of deposit will likely grow to between 280 billion yuan and 360 billion yuan next year, an HSBC report said last week.

About 860 billion yuan is in bank accounts around the world, according to Deutsche Bank, with yuan deposits in Hong Kong, Singapore, Taiwan and London likely to rise to 1.25 trillion yuan next year.

Taiwanese companies and consumers may also be able to set up accounts in the currency after a pact signed between Beijing and Taipei in August.

The island will work to start clearing the currency within a month, Taiwan's central bank governor told lawmakers last week.

Bank of China's Taipei branch is now the sole bank that can clear transactions involving yuan offshore.

China Construction Bank sold the first yuan-denominated securities listed by a mainland company in London last month.

The bank raised 1 billion yuan of 3.2 per cent bonds due in November 2015.