CNH Tracker-Taiwan's Formosa bond market to remain a local affair
By Michelle Chen
HONG KONG, Nov 28 (Reuters) - Taiwan's decision to allow
Chinese mainland firms to issue yuan bonds in the island may
encourage more supplies from China, but it is unlikely to
challenge Hong Kong's yuan bond market any time soon.
The so-called "Formosa (Taiwan OTC: 8171.TWO - news) " bond, or Chinese yuan debt issued in
Taiwan, will stay largely as a domestic one that serves local
investors given multiple barriers that may dampen appetite of
global issuers and investors, analysts say.
Issues that will likely prevent the fledgling market from
growing rapidly include the need to seek approvals for yuan bond
issues and obtain a licence in order to purchase bonds, as well
as a withholding tax for investors, they say.
Taiwan is a latecomer in developing yuan business after a
clearing bank was assigned there in late January. A handful of
firms sold a total of 3.9 billion yuan ($640.14 million) bonds
before the market fell into quietness since July.
The Financial Supervisory Commission announced on Tuesday
that Chinese policy banks, state-owned commercial banks,
joint-stock banks and their overseas branches can sell Formosa
bonds with approvals from the GreTai Securities Market (GTSM).
Mainland subsidiaries of both Taiwan financial institutions
and Taiwan-listed companies are also allowed to issue yuan
bonds.
Bank of Communications and Agricultural Bank of
China immediately filed applications to issue yuan
bonds on Wednesday, totalling 2.2 billion yuan.
As required, these bonds can only be sold to institutional
investors, many of whom already have access to Hong Kong's yuan
bond market where returns are much more attractive than Taiwan
dollar bonds or even higher than Formosa bonds.RECENT STORIES:
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