With renminbi-denominated products gaining more investor interest, DBS said it expects total offshore renminbi (RMB) bond issuance in the region to reach almost 350 billion yuan this year.
According to DBS, there have been 107 billion yuan worth of RMB bonds issued in the region so far in 2014, and this is already about 40 per cent of the total last year.
DBS said offshore RMB bond issuance will remain buoyant for a couple of factors.
Firstly, the domestic cash crunch in China means onshore funding liquidity is expected to remain tight.
Secondly, the Chinese central bank (People’s Bank of China) has said that it plans to expand the yuan’s trading band in an orderly manner this year to make the currency more convertible and to support a growing role in trade finance and forex trading.
However, DBS also said there are a couple of impediments that might hinder the further development of the offshore RMB bond market.
Clifford Lee, head of fixed income at DBS Bank, said: “One of the bigger impediments to the more rapid growth of the market is the use of the RMB. The application to utilise the RMB and the greatest pool of requirement still continues to be onshore in China.
“There are still strict guidelines which govern the repatriation of such offshore RMB onshore, and any continued relaxation there will be welcomed by the market.”
As for Singapore’s role in the offshore RMB bond market, experts said Singapore is in a good position to reach out to regions outside of Greater China, namely Southeast Asia, in order to pull in new issuers and investors and increase participation in the offshore RMB market.
Source : Channel News Asia | March 12, 2014