Whetting banks’ appetite for Singapore dim sum – opinion

The city state has opened for offshore renminbi business, and should focus on what it does best, using its wealth management advantages to jumpstart dim sum bond activity.

  • 08 Apr 2013
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The desire of global banks to seize upon offshore renminbi opportunities has had them act like storm chasers of late. International institutions are running from country to country, eager to cement an early presence in the CNH (Hong Kong), CNL (London) and CNT (Taiwan) markets and gain some form of first mover advantage.

The banks now have a new capital market bauble to pursue, with Singapore announcing that it is finally open for renminbi business too.

To recap, on April 2 Singapore launched itself as a renminbi hub through three announcements. First, the People’s Bank of China (PBoC) confirmed that it signed an agreement with ICBC Singapore to provide cross-border RMB trade settlements. ICBC Singapore then announced that it has officially kicked off its renminbi platform, hoping to grow its cachet of CNS-denominated assets from the Rmb15.3 billion (US$2.47 billion) at the end of 2012.

Likewise, the PBOC signed a memorandum of understanding with the Monetary Authority of Singapore (MAS) to promote future financial cooperation.

These developments are positive and have come long in the making. And the Lion City and its shiny new clearing bank will no doubt seek to boost activity through product launches, trade settlement and deposit growth. But Singapore should also consider how else it can appeal to global investors, issuers and market markers in the offshore renminbi.

In other words, it needs to find itself a niche to differentiate itself from the increasingly crowded community of offshore renminbi hubs.

One rival is Taiwan, which should be praised for its advancements. Just as news surfaced that ICBC would become Singapore’s renminbi clearing bank, headlines were revealing that Bank of China’s (BoC) Taipei branch would clear Taiwan’s renminbi.

Since then, Taiwanese regulators and central bank have actively released figures of renminbi deposits in the country – at Rmb26.9 billion by January – and announcing incentives and investment opportunities for individuals and companies.

Further, Taiwan has a different appeal than other global renminbi hubs because it is far more insular. Its CNT business will grow out of trade with China and real-money opportunities. And banks that get in there early stand to gain better relationship with local clientele who may look to do more global investing with their renminbi.

In the past month, headlines have flown that global banks including Barclays, BNP Paribas, Deutsche Bank and HSBC are all considering issuing dim sum bonds out of Taiwan, which always helps to lend legitimacy to a country’s renminbi efforts. The buzz – even if premature, as Barclays and HSBC representatives attest – counts for something.

Elsewhere, HSBC and Standard Chartered were also early movers in London, having issued renminbi debt within two months of the city announcing its own ambitions to be an offshore renminbi hub.

London’s appeal, much like Hong Kong, is that it is a global financial centre accessible to the world. As Europe’s financial hub it has the added advantage of proximity to the Western world, with European, American and Latin American bankers looking towards the UK for their renminbi needs.

Hong Kong has that hat in Asia, obviously helped by its relationship with Beijing as market regulators look to internaitonalise its currency.

Singapore’s advantage

Singapore has been viewed as an in-between sort of renminbi market, possessing several of the advantages enjoyed by London and Hong Kong in terms of a global platform, but not necessarily offering anything better or stronger.

To kick off its own offshore renminbi activity, the city state needs to entice global banks to issue renminbi bonds as a clear statement that its market is seriously ready for business.

One key way that Singapore can do this is to utilise one of its genuine advantages: its wealth management strength.

Given that Singapore is a wealth management and private banking hub in Asia, and increasingly globally, it ought to be able to channel this strength into renminbi business and dim sum issuance. It already offers tax and legal incentives and was an early adopter of renminbi bond funds – having a few headline bond issues will only strengthen Singapore’s position to attract deposits.

It’s a favourable environment for banks such as Credit Suisse and UBS, and private names such as BSI Bank, BNY Mellon, Julius Baer and RBC Wealth Management to consider dim sum, appeal to local investors and use the cash to further their own renminbi businesses.

Wealth management is also a key area for domestic banks DBS, OCBC and UOB – they would have a distinct need for renminbi for lending, too. Instead of issuing in Hong Kong as OCBC and UOB have done – or China in the case of DBS’ panda bond issue – Singapore is a no-brainer.

The obvious part of this scheme is that it doesn’t really matter where a renminbi bond is issued – global investors will have access to it through their trading platforms. But the symbolism is huge: when HSBC conducted its London dim sum bond issue, the People’s Bank of China bolted the headline onto its own website. It’s a strong show of support.

Given the nature of these banks, a dim sum bond issue may suit their needs well: these bonds are small in size at an average of Rmb500 million-Rmb1 billion, and debut tenors are often just three years. It’s not a bad trade off, and can give banks an edge over its competitors – something Credit Suisse and UBS can use given recent events, for example. Low supply of dim sum debt in 2013 may make pricing even more appealing if they act soon.

Singapore should encourage these players to enter the market by emphasising the important of wealth management. It’s already doing a strong job making a global name for itself in this space, but buttering up banks with meetings and on road shows won’t hurt, especially as it now has all the tools necessary to become a proper renminbi hub.

  • 08 Apr 2013

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 Bank of China (BOC) 28.62
2 CITIC Securities 21.06
3 China CITIC Bank Corp 9.72
4 China Merchants Bank Co 9.18
5 Industrial and Commercial Bank of China (ICBC) 7.56

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 12-Jan-18 Mitsubishi UFJ Financial Group (MUFG) Japan 1,000
2 12-Jan-18 Mizuho Bank Japan 300
3 10-Jan-18 Daimler Germany 3,000
4 22-Nov-17 Province of British Columbia Canada 1,000
5 15-Nov-17 Daimler Germany 4,000

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 55.56
2 CLSA 22.22
2 Mitsubishi UFJ Financial Group (MUFG) 22.22

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 17-Jan-18 IL&FS Transportation Networks India 100
2 10-Jan-18 IL&FS Transportation Networks India 900
3 08-Jan-18 Westpac Australia 500
4 30-Nov-17 Ministry of Finance of the People's Republic of China (MoF) China 7,000
5 15-Nov-17 Bank of China Paris Branch (BOC Paris) China 1,000