By Saikat Chatterjee
HONG KONG, Oct 10 (Reuters) - For an indicator of China's
eagerness to promote use of its currency in international trade,
look no further than the yuan bond market in Hong Kong.
The $80 billion strong and growing debt market in bonds
denominated in the Chinese currency notched a third consecutive
month of steady gains in September, a bright spot in a generally
volatile and bleak investment landscape.
That solid performance came on the shoulders of the yuan,
which has been the only Asian currency to strengthen against
the U.S. dollar this year even as others have swooned. This has
encouraged foreign companies to increasingly consider the yuan
as a financing tool.
Last week, British energy giant BP raised nearly $200
million from its second offshore renminbi bond in Hong Kong,
showing again that multinationals not only can get significant
amounts from the CNH market, but also at a longer tenors.
In recent years, as a growing number of companies considered
using reniminbi for settling trade with Chinese counterparts,
access to yuan financing at favourable terms was a major
To alleviate those worries, Beijing this year has taken a
slew of steps aimed at making it relatively easy for companies
that operate inside China to move their yuan funds overseas.
A stable bond and currency market also helped.
Trading of the Chinese yuan in global foreign exchange
markets has more than tripled from three years ago due to the
expansion of offshore trade. The yuan is now the world's ninth
most-actively traded currency, according to a survey by the Bank
of International Settlements.
What is striking is that China's capital account has
remained virtually closed in that period of supercharged growth.
The combination of relaxed trade restrictions and stable
markets has translated into impressive gains for yuan use. Now,
nearly 18 percent of China's trade with the world is denominated
in the yuan, compared to around 12 percent at the end of 2012.
That percentage will rise, particularly as China does more
and more of its trade with Asian neighbours and emerging
markets, and it exports higher-value goods.
'The day is not far when an Indonesian mine operator buys
heavy machinery from Zoomlion financed by an Indonesian bank
that raises yuan funds by issuing dim sum bonds in Hong Kong,'
said Louis Vincent Gave, the CEO of GaveKal, an independent
research firm in Hong Kong
WEEK IN REVIEW:
Latest SWIFT data showed the yuan is now the world's eighth
most traded currency in the world with a 1.49 percent market
share. According to its data, the bulk of yuan offshore trading
not done in Hong Kong is conducted in London, an indicator of
the city's strong position in global currency markets.
Citigroup became the first bank in Latin America to
issue a letter of credit in yuan, the bank said. The credit,
done in Peru for a retail sector client, shows that Beijing's
efforts to internationalise its currency are paying off. Trade
between China and Latin America grew 8 percent to more than $255
billion in 2012, Citigroup said.
Standard Chartered Bank completed a 2.5 billion
yuan cross-border lending deal for Nokia Siemens Networks
(China) Ltd, enabling the company to lend to its
offshore-related firms for a tenor of one year. StanChart said
this was the bank's seventh yuan cross-border lending deal in
three months and the total amount it processed in that period
topped 10 billion yuan.
CHART OF THE WEEK: http://link.reuters.com/ryd73v
Yuan bonds continue to extend their strong performance over
their Asian debt counterparts delivering better returns on a
risk adjusted basis thanks to a strong and a stable currency.
CNH Tracker-Foreign issuers revive dim sum market after summer
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
(Editing by Richard Borsuk)
Keywords: MARKETS OFFSHORE/YUAN
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