Foreign banks frenzy on yuan-denominated bond market in Chinese mainland
The Hong Kong-based Bank of East Asia (BEA) announced that it would issue 2-billion-yuan denominated financial bonds to institutional investors for the first time in the Chinese mainland market on March 18. More of such issuances are expected to come this year. Their enthusiasm will hopefully make the Chinese currency more international and help reduce the liquidity on the market, analysts say.
The 2 billion yuan is the first batch of BEA's 5-billion-yuan bond issuance plan, which was approved by the People's Bank of China, the central bank, in December 2010. The remaining 3 billion yuan could probably be available for investors within this year. BEA says the fund to be raised could help to "sustain its robust growth" in the Chinese market.
Foreign banks are showing increasing interest in the inter-bank bond market on the Chinese mainland. BEA is the second foreign bank that has issued yuan bonds in the Chinese mainland inter-bank market following Bank of Tokyo-Mitsubishi UFJ. HSBC and Standard Chartered also have plans to follow suit.
That happens in the context of the growing momentum of the internationalization of the Chinese currency yuan. Hong Kong has already become an increasingly important offshore yuan market where billions of yuan denominated bonds has been issued by both Chinese and foreign banks. The first yuan bonds offered by foreign banks were from HSBC, followed by BEA in 2009.
Analysts believe that such moves by foreign banks could bring more capital resources for them to fuel their expansion on the mainland market and contribute to the internationalization of the Chinese currency
Given the excessive liquidity on the Chinese mainland market, the bond issuance by foreign banks can also help to drain the liquidity to some extent, they think. However, some also warned that the yuan pooled on the Hong Kong market has to be put under strict surveillance to prevent it from flowing back to the mainland market.
By L! i Jia, P eoples Daily Online
Weekly review
The 2 billion yuan is the first batch of BEA's 5-billion-yuan bond issuance plan, which was approved by the People's Bank of China, the central bank, in December 2010. The remaining 3 billion yuan could probably be available for investors within this year. BEA says the fund to be raised could help to "sustain its robust growth" in the Chinese market.
Foreign banks are showing increasing interest in the inter-bank bond market on the Chinese mainland. BEA is the second foreign bank that has issued yuan bonds in the Chinese mainland inter-bank market following Bank of Tokyo-Mitsubishi UFJ. HSBC and Standard Chartered also have plans to follow suit.
That happens in the context of the growing momentum of the internationalization of the Chinese currency yuan. Hong Kong has already become an increasingly important offshore yuan market where billions of yuan denominated bonds has been issued by both Chinese and foreign banks. The first yuan bonds offered by foreign banks were from HSBC, followed by BEA in 2009.
Analysts believe that such moves by foreign banks could bring more capital resources for them to fuel their expansion on the mainland market and contribute to the internationalization of the Chinese currency
Given the excessive liquidity on the Chinese mainland market, the bond issuance by foreign banks can also help to drain the liquidity to some extent, they think. However, some also warned that the yuan pooled on the Hong Kong market has to be put under strict surveillance to prevent it from flowing back to the mainland market.
By L! i Jia, P eoples Daily Online
Weekly review
Editor
Comments