Singapore Launches RMB Clearing Service

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May 29 – The Singapore Branch of the Industrial and Commercial Bank of China (ICBC) kicked off its RMB clearing service in Singapore on Monday, marking an important step in Singapore’s development as an offshore RMB center.

ICBC’s Singapore branch is the first RMB clearing bank designated by China in another country; with Hong Kong and Taiwan previously the only places outside of Mainland China with designated RMB clearing banks. On Monday, the Singapore branch cleared 53 transactions worth a total of RMB1.61 billion, with 23 out of the 49 participating banks using the clearing service.

Ever since the government’s announcement allowing the clearing of RMB spot trades in Singapore from May 27, the world’s top banks have been racing against each other to capitalize on the opportunities brought on by Singapore’s offshore RMB bond market. HSBC and Charted Standard were the first batch of banks to issue RMB-denominated bonds in Singapore, raising a combined RMB1.5 billion.

Standard Chartered said its three-year senior unsecured issuance is priced with a coupon of 2.625 percent and has generated over RMB3 billion in orders from 75 investors across Asia. Meanwhile, HSBC priced its two-year fixed rate notes at 2.25 percent, which is the first RMB bond to be priced within the Association of Southeast Asian Nations (ASEAN) trade bloc.

“This issuance will help open the market to other issuers looking to fund themselves internationally in RMB, offer new investment opportunities to the substantial pool of wealth managed in Singapore, and assist in funding the rapidly growing RMB-denominated trade business in Asia,” said Matthew Cannon, head of global markets at HSBC Singapore.

Singapore has been widely expected to serve as a gateway for the use of RMB in Southeast Asia, with the increasing trade between China and ASEAN and the continuing appreciation of the RMB contributing greatly to the development of Singapore’s offshore RMB market. Bilateral trade between China and ASEAN amounted to US$138.97 billion in the first four months of 2013, up 18.1 percent year-on-year, while on Monday, the central parity of RMB against the U.S. dollar hit a record high, reaching 6.1316.

“We see this as another milestone for Singapore in the development of its status as an offshore RMB hub,” said Ray Ferguson, chief executive officer of Standard Chartered Singapore. “Singapore already leads as a regional treasury center, is a springboard to Southeast Asia along the key trade corridor with China, and provides a hub for Asian wealth management and commodities trading. Singapore’s contribution to the development of the RMB is further enhanced by this issuance.”

Deutsche Bank, Southeast Asia’s largest bank by assets, is reported to launch RMB-denominated bonds in Singapore shortly.

In another move, the Singapore Exchange launched its depository services for RMB-denominated bonds on Monday, in an effort to support Singapore’s development as an offshore center for issuers and investors of RMB-denominated bonds.

As of the end of June 2012, RMB deposits in Singapore totaled RMB60 billion. Meanwhile, the cross-border RMB volumes handled in Singapore ranked second among overseas regions, behind only Hong Kong. In March, the Monetary Authority of Singapore (MAS) and the People’s Bank of China doubled the size of their bilateral currency swap facility from RMB150 billion to RMB300 billion, allowing MAS to provide RMB liquidity to banks in Singapore.

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