Reuters: US Dollar Report: CNH Tracker-Dim sum bond issuance set for active December quarter

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CNH Tracker-Dim sum bond issuance set for active December quarter Oct 31st 2013, 03:42 Share this Email Print Reprints Wed Oct 30, 2013 11:42pm EDT By Michelle Chen and Umesh Desai HONG KONG, Oct 31 (Reuters) - Offshore yuan bond issuance is set for a strong rebound in the last quarter of 2013 as China accelerates its plans to offer the Chinese currency as an alternative investment option for global investors beyond Hong Kong. Even as the supply and demand for these so-called dim sum bonds have waxed and waned in recent months tracking expectations of the yuan's trajectory, analysts are expecting a heavy December quarter. With a planned 10 billion yuan ($1.64 billion) jumbo debt from China's Ministry of Finance (MOF), and soon-to-be announced expansion of a pilot scheme that allows mainland issuers to tap dim sum bonds, the primary market looks set to boom again. The $80 billion dim sum market has been largely lacklustre since the MOF sold its 13 billion yuan of bonds in June during choppy market conditions in the wake of a cash squeeze in China's onshore money market. "The pipeline of CNH bond issuance is now pushed to Q4," said Liu linan, an analyst at Deutsche Bank, adding "we expect funding activities to resume and we forecast Q4 net supply of 60 billion yuan." If realised, that will be four times the total issues of the third quarter when U.S. Federal Reserve tapering worries hurt global credit market sentiment. The dim sum market has outdone its Asian peers by eking out three consecutive months of gains amid global market volatility. Monthly returns tracked by HSBC climbed to 0.38 percent in September, up from 0.21 percent a month earlier. The rally is likely to continue given improved yuan liquidity in the offshore market as the Chinese currency gradually finds its foothold in Singapore, Taiwan, London and other cities around the world. "Many investors who have traditionally invested in dollar bonds have now started looking at CNH space, so there is increased demand from investors not just from Asia but also other parts of the world as RQFII quotas have increased," said a Hong Kong-based analyst with a European bank. Beijing recently expanded the Renminbi Qualified Foreign Institutional Investor programme to Singapore and London with 50 billion and 80 billion yuan quotas, respectively, permitting them to enter China's onshore capital markets. China Construction Bank on Tuesday also opened its European headquarter in Luxembourg, becoming the third Chinese bank to conduct business in the tiny Grand Duchy - Europe's largest investment fund centre and a leading private banking hub. [ID: nL5N0IJ20B] Participation from more offshore yuan centres beyond Hong Kong will no doubt boost demand in yuan assets and thus lift international trade settled in yuan, which now accounts for about 18 percent of China's total trade, compared with less than 1 percent in 2009 when the currency was first allowed to be used in international trade. RMB customer payments - a good proxy for trade settlement - in Europe grew by 163 percent over the last year, much higher than the 109 percent observed in Asia (excluding China and Hong Kong) in the same period, according to SWIFT. WEEK IN REVIEW: * China Ping An Insurance tapped the dim sum market this week with a 1.8 billion yuan five-year bond which was fixed at 4.75 percent, according to a term sheet seen by Reuters. The bond attracted 113 investors with order books reaching 5.5 billion yuan. * Yuan trade settlement amounted to 3.16 trillion yuan in the first nine months in 2013, statistics from China's central bank showed. Trade settled in the Chinese currency stood at 400.9 billion in September, up 14 percent from a month earlier. * RMB remained the 12th most used payment currency of the world, with an increased market share of 0.86 percent compared to 0.84 percent in August, according to SWIFT. RMB payments increased in value by 4.6 percent in September, whilst the growth for all payments currencies was at 1.2 percent. CHART OF THE WEEK: RMB ranked the 12th most used payment currency in September:RECENT STORIES: CNH Tracker-Dim sum market set for a booster shot More stories about the CNH market Daily onshore yuan reports Daily China money market reports Offshore yuan rate Onshore yuan rate Offshore yuan dealt Onshore yuan on CFETS THOMSON REUTERS SPEED GUIDES Link this Share this Digg this Email Reprints

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