China

In this round-up, China cross-border RMB trade settlement falls 12.1% in January, Taiwan RMB deposits keep climbing, Canada is updating market infrastructure to support RMB business, and the Shanghai-Hong Kong Stock Connect celebrates its first three months in operation.

Two important policy developments in the Shanghai Free Trade Zone (FTZ) are set to revolutionise the way in which entities based there can raise funds and transfer them.

Ever since the launch of the Shanghai-Hong Kong Stock Connect initiative on November 17 last year, there has been market chatter about setting up a similar Through Train to connect debt markets. This week saw Charles Li, the chief executive of Hong Kong Exchanges and Clearing (HKEx), confirm this intention at a media event, but market participants warn that doing so will not be as easy as simply copying the Stock Connect model.

In this round-up, South Korea’s RMB deposits dropped 2.6% in January, Hong Kong RMB clearing activity fell by 8.6%, Xinjiang is set to boost cross border RMB business with Pakistan, and Thailand looks to allow RMB settlement for the trading in local securities.

Standard Chartered reckons the renminbi is poised to take on the yen this year to become the fourth most used payment currency worldwide, after reaching fifth position in December.

No sooner has the Shanghai-Hong Kong Stock Connect got up and running than attention is already turning to the Next Big Thing — the expansion of the scheme into new markets and new asset classes. The fervour is understandable, but premature. Market participants should get to grips with what they have first before lobbying for shiny new toys.

With the renminbi-dollar cross currency swap (CCS) shooting up to record levels over the past week, international high grade issuers could be tempted back in to the offshore renminbi (CNH) market.

State-owned enterprise Dalian Port became the first Chinese issuer to tap the offshore renminbi bond market this year on February 11, raising Rmb800m ($130m) from a three year bond. But it was a tough deal to execute as demand was lukewarm and it was only the presence of anchors that helped push the credit enhanced bonds through.

Export Import Bank of Korea (Kexim) sold its second offshore renminbi bond in as many weeks, raising Rmb1bn ($162m). This time, the sophisticated Korean issuer took the unique approach of reaching out to both onshore Taiwan investors and offshore Reg S investors, issuing what became the first CNH public bond transaction out of Korea dual listed in Taiwan and Singapore.

Maybank, Malaysia's largest bank by assets, has launched its debut renminbi offering in Taiwan’s Formosa bond market, sources close to the deal have told GlobalRMB.

French bank Société Générale is preparing to issue its debut Formosa bond, eyeing a three year transaction with an initial guidance of 4%. At the time of writing the issuer was mandating an underwriting group.

Taiwan investors' preference for longer tenors and a better performing US economy than that of Europe have helped Morgan Stanley tap the Formosa bond market at the same level as Deutsche Bank, despite selling a longer deal and being rated as much as two notches below the German borrower.