Investors rush for yuan bonds in Taiwan

Taiwan's first yuan debt offerings by four big mainland banks have been snapped up, opening the floodgates for up to 60 billion yuan (HK$76.5 billion) of fundraising as Beijing looks to strengthen the island's role in the drive to internationalise the yuan.

Bank of Communications, Bank of China, China Construction Bank and Agricultural Bank of China raised a combined 6.7 billion yuan from the so-called Formosa bonds, which begin trading today.

The successful bond sales in Taiwan, which is sitting on a pile of 123 billion of yuan deposits, have whetted mainland firms' appetite for more debt issuance on the island.

Analysts said the size of Formosa bonds could top 60 billion yuan in two to three years as the mainland and Taiwan consolidated their economic ties.

"In Taipei, there's a huge yuan asset pool but limited usage of the deposits," said Zhang Weizhong, the head of the treasury department at Bank of Communications in Hong Kong. "It creates a good opportunity for mainland firms' fundraising."

Shanghai-based Bocom was the first mainland firm approved to sell Formosa bonds after Taiwan deregulated the market to welcome mainland corporate borrowers.

Taiwan earlier allowed only non-mainland firms to sell yuan bonds but reversed the policy last month, giving Bocom, the mainland's fifth-largest lender, the clearance to offer yuan debt.