Taiwan Opens Local Yuan-Bond Market to Some Mainland Issuers

Taiwan plans to let some mainland Chinese companies issue yuan-denominated notes on the island, as the government seeks to expand options for its citizens to invest their 123 billion yuan ($20 billion) of savings.

The Financial Supervisory Commission will allow selected Chinese firms to sell Formosa bonds to institutional investors from tomorrow, the regulator said yesterday in a statement. Chinese policy banks, state-owned commercial lenders and shareholding commercial banks are among companies permitted to sell yuan debt in Taiwan.

A pact signed in August 2012 on cross-strait currency clearing paved the way for yuan-denominated debt and deposits on the island, which competes with Hong Kong, Singapore and London for a share of renminbi business. Deutsche Bank AG and local lender CTBC Bank Co. were among companies that sold 3.9 billion yuan of Formosa notes this year. Yuan deposits at Taiwanese banks totaled 123 billion yuan as of Oct. 31, the central bank said this month.

Opening the Formosa bond market to mainland companies is a “major breakthrough,” Australia & New Zealand Banking Group Ltd. economists Li-Gang Liu, Raymond Yeung and Hao Zhou wrote in a research note on Nov. 25, following the publication of reports of the decision that cited unidentified people. In Hong Kong’s Dim Sum market, Chinese firms and financial institutions represent 68 percent and 50 percent of issuance in their respective segments in 2012, according to the note.

Chinese subsidiaries of Taiwanese financial institutions and firms that are registered in the mainland and are subsidiaries of Taiwan-listed companies are also allowed to issue Formosa bonds.

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