China’s Bank of Communications (交通銀行) has filed applications to issue 1.2 billion yuan (US$197 million) worth of yuan-denominated bonds — better known as Formosa bonds — in Taiwan, making it the first Chinese issuer to take advantage of the new deregulation.
The move came after the Financial Supervisory Commission (FSC) on Tuesday allowed Chinese enterprises to issue yuan bonds to help invigorate the local bond market and digest yuan deposits.
The bonds will be offered in two stages — tenures of three years with an indicative price quotation of 3.4 percent and of five years with an indicative price quotation of 3.7 percent, said HSBC Bank Taiwan, the appointed lead manager and bookrunner on behalf of the Bank of Communications.
The issuance serves as an important milestone for Taiwan’s offshore yuan market, as it aims to take part in the yuan’s internationalization, HSBC Taiwan managing director and head of markets Adam Chen (陳志堅) said.
“The inclusion of Chinese issuers signifies the diverse development of the Formosa bond market and represents an important step forward for Taiwan in developing into an offshore yuan center,” Chen said.
Six local and foreign corporates have issued Formosa bonds valued at 3.9 billion yuan in Taiwan since the deregulation in February. The amount may rise to 100 billion yuan by the end of the year as set by the FSC.
The Bank of Communications first issued offshore yuan-denominated bonds in Hong Kong in 2008 and will set up a new benchmark in Taiwan’s offshore yuan market by its issuance here, said Hu Fengyi (胡峰毅), who is assistant general manager of the Chinese lender’s Taipei branch.
HSBC has a long-term relationship with the Bank of Communications and became its second-largest shareholder in 2004.