The week in renminbi: China eyes more non-RMB sovereign bonds, Rusal may open Baikal bond market, Bank of Jamaica looks into RMB as reserve asset
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The week in renminbi: China eyes more non-RMB sovereign bonds, Rusal may open Baikal bond market, Bank of Jamaica looks into RMB as reserve asset

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China is weighing the possibility of making its non-RMB sovereign bond issuance more regular, Russia’s Rusal could soon sell RMB bonds in its domestic market, and Bank of Jamaica is discussing whether to hold RMB in its reserves.

Bonds:

Following China’s landmark sovereign dollar bond last week, the country is studying how to continue issuing non-renminbi bonds, according to Shi Yaobin, China’s vice ministry of finance, quoted in local media reports on October 28.

"Regardless of whether we continue to issue non-RMB sovereign bonds or not in the short term, we will stand firm to boost two-way opening of the capital market, exploring a long-term mechanism for non-renminbi bonds’ issue,” he added.

Meanwhile, prices in the onshore bond market have continued to tumble as a result of falling liquidity in the market. People’s Bank of China tried to support the market with a 63-day reverse repo operation, but government bond yields have continued to rise, with 10-year paper hitting 3.88% by noon on October 30, the highest in three years.

Rusal, a Russian aluminium producer, could issue RMB-denominated bonds on the Moscow Exchange, according to a Russian state news agency. The deal would mark the opening of the so-called Baikal bond market. There had been an expectation that Russia’s finance ministry would be the first issuer in the market, but Rusal may be the first.

"We have registered the exchange bonds program on the Moscow Exchange,” Elena Ivanova, a director at Rusal, was quoted saying. "They can be denominated in different currencies, including yuan. Therefore, we are ready to look in this direction if Chinese investors show interest in particular."

Rusal has already tapped the renminbi-funding market, issuing two Panda bonds so far this year.

Trade:

Companies in Australia and New Zealand have yet to warm to the renminbi as a trade currency, according to local media reports. Trade with China from the region has tripled over the past ten years but RMB usage remained negligible, according to a local banker quoted in the October 29 article. For Australia, the share of trade denominated in RMB stood at just 0.4% compared to 81.5% in dollars.

Reserves:

Bank of Jamaica, the country’s central bank, is looking at gaining exposure to the renminbi as a reserve asset, according to an October 28 media report. Given the entry of the RMB in the IMF special drawing rights basket, the country was investigating the possibility of holding RMB assets in proportion to the country’s current and capital account needs, according to John Robinson, senior deputy governor of the Bank of Jamaica.

Belt and Road:

The focus of M&A activities along the Belt and Road has been in the Asean region and, to a lesser extent, Central Asia, according to an October 30 report by French lender Natixis. Singapore alone accounted for 23% of China’s M&A within the Belt and Road Initiative's footprint.

"For higher-risk geographies, Chinese companies seem to prefer to engage in project financing than taking the ultimate ownership,” wrote Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis. "All in all, we believe that neighbouring low-risk countries will still be the main target for Chinese M&A in the coming years.”

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