Top banks are racing against each other to carve out a share in Singapore's offshore renminbi market following the Monetary Authority of Singapore's (MAS) announcement allowing the clearing of renminbi spot trade in the city from May 27. This is the latest move in the MAS's effort to develop the Lion City's offshore renminbi centre.

"The offshore renminbi clearing operation in Singapore is lucrative as banks can expand the new business and generate new clients," Crystal Zhao, HSBC fixed-income research associate, told The Asset in a phone interview.

Zhao's remarks came as HSBC, acting through its Singapore branch, claimed to price the first CNY issue on Monday. The Reg S two-year, CNY 500 million offering was priced at par with re-offer yield of 2.25%. Proceeds from the issue will be used for general corporate purposes. HSBC was the sole bookrunner and lead manager for the transaction with ICBC (Asia) and UOB acting as co-managers. The bonds will be cleared through Central Depository Singapore, with linkage to Euroclear and Clearstream.

Standard Chartered also said in a statement that it has raised one billion renminbi through the first issuance of Singapore-listed offshore CNY bonds on May 27. The three-year notes were priced with a coupon of 2.625% after generating over three billion renminbi in orders from 75 investors across Asia.

Ray Ferguson, chief executive officer, Standard Chartered Singapore, said, "We see this as another milestone for Singapore in the development of its status as an offshore renminbi hub. Singapore already leads as a regional treasury centre; 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 renminbi is further enhanced by this issuance."

In addition, Deutsche Bank announced on May 23 that it has completed the first Singapore dollar/offshore renminbi spot trade to be cleared in Singapore. DBS is also reported to be preparing to launch such bonds in Singapore after the city opens the offshore renminbi clearing service.

The Lion City's stepped-up efforts in the offshore renminbi market development came from the increasing trade between China and Asean, and the continuing appreciation of the renminbi, HSBC's Zhao said.

China's trade with Asean amounted to US$138.97 billion in the first four months to April, up 18.1% from a year earlier and representing 10.87% of China's overall trade during the period, according to statistics from China's General Administration of Customs. Meanwhile, the People's Bank of China set the renminb's daily midpoint against the US dollar at a record 6.1811 on Monday. The Chinese currency's central parity has risen 1.69% against the greenback this year.

Though there is a huge demand for renminbi clearing from Asean companies, banks are still testing the new service in Singapore and waiting for investor feedback, Zhao said. Asean firms can clear their renminbi settlement and issue offshore-renminbi bonds in Hong Kong and Taiwan with regulatory approval needed for the latter. "Whether local companies will choose banks in Singapore for renminbi clearing or financing depends on the packages that banks offer, which includes the facility, service costs and lawyer fees," Zhao said.

Big banks with offshore renminbi business experiences will have the advantages in taking major shares in the offshore renminbi market in Singapore, Zhao added. They have a big client base, good portfolio management and are familiar with clients' needs, she noted.

China's central bank appointed ICBC's Singapore branch to act as the renminbi clearing bank in the city in February 2013. Renminbi deposits in Singapore have exceeded 60 billion yuan in the middle of last year. - CW