China
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Hybrids and convertible bonds will be the next product evolution in the offshore renminbi debt market.
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The currency is likely to appreciate due to China’s strong economic growth, and it could reach ‘basic convertibility’ by 2015, says Yiping Huang, chief emerging Asia economist of the UK bank.
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Dim sum issuers need a change of strategy to remain competitive as investor demand for these instruments evolve from a currency to credit play, believe experts.
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Top 3 Offshore RMB DCM Transactions - 2012 YTD
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Debt bankers think more Korean issuers will tap the Thai baht market over the next few months, driven to local currency funding by rising costs in the international bond market.
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Asia’s dollar markets are now suffering from the indigestion that has long been expected after a feeding frenzy earlier this year. The region’s domestic markets will now have to pick up some of the slack — and local debt liquidity is about to be put to the test.
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Chinese regulators are going to allow small and medium-sized enterprises (SMEs) to issue private placements, helping to spur the development of a high yield market on the mainland.
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HSBC is offering the first non-US dollar currency trading pairs linked to the offshore renminbi, while the Hong Kong Monetary Authority has relaxed limits on CNH net open positions. Both will boost liquidity.
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The bank announced today that it has issued a combined Rmb1 billion (US$158.1 million) euro commercial paper (ECP). The milestone signals the deepening of London’s role as an offshore renminbi hub, say analysts.
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Standard Chartered is claiming an industry first after topping Rmb1bn ($158.2m) in outstanding euro commercial paper volume and is positioning itself as the largest issuer of renminbi ECP from London.
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Export-Import Bank of Korea (Kexim) plans to revisit the international bond market in the second half of the year, after successfully raising a record ¥100bn ($1.26bn) from issuing Samurai bonds in Japan last week.
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Singapore’s hotel operator Banyan Tree raised S$50m ($39m) from the domestic bond market late last week, launching the deal at a time when the European debt worries discouraged other borrowers from selling debt. The absence of any competition helped the firm get tight pricing.