The outstanding balance of yuan-denominated deposits in the nation is expected to hit 400 billion yuan (US$64.95 billion) next year, driven by relatively higher yields and the strength of the yuan against the New Taiwan dollar, Standard Chartered PLC said in a report released yesterday.
The British banking group announced the latest result of its Renminbi Globalisation Index, with the index surpassing the 2,000-point mark to 2,016 last month, up 1.25 percent from the previous month.
GROWING DEPOSITS
Standard Chartered attributed the month-on-month rise in the index to the growth of yuan deposits around the world, as foreign currency turnover and Dim Sum bonds performance remained lackluster.
On a year-on-year basis, the index in October showed a 64.5 percent climb, which marked its slowest rise in 13 months, the bank said in a statement.
Taiwan retained its position as the fourth-largest hub for financial transactions in the Chinese currency in October, behind Hong Kong, London and Singapore, the statement said.
Standard Chartered expects overall yuan deposits in Taiwan to rise to 400 billion yuan next year, from the 300.62 billion yuan recorded as of the end of October, mainly on the back of deposit creation and policy initiatives.
FORMOSA BONDS
Standard Chartered said a surge of Formosa bonds issuance — which has totaled 19.8 billion yuan for this year, nearly twice the level recorded for all of last year — has resulted from the government’s regulatory relaxation.
“We expect the size of the Formosa bonds market to increase further in 2015,” the statement said.
RECYCLING CHANNELS
The bank also said there are challenges ahead, as the nation has not established additional channels to recycle yuan deposits, which indicated that local institutions and investors cannot efficiently deploy the large pool of yuan liquidity.
To increase recycling channels, Taiwanese authorities are proposing to their Chinese counterparts the further expansion of the Kunsan Experimental Zone project to regions such as Shanghai, Xiamen and Jiangsu, the bank added.
85 PERCENT
Overall, Hong Kong remained the largest offshore yuan market, taking up almost half of the index, while the seven largest yuan centers make up almost 85 percent
The index issued by Standard Chartered measures yuan business growth in four key areas: deposits, capital-raising tools, international commerce and foreign exchange.
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