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TRANSCRIPT
RMB: Going Global
Prepared by: RMB Business Development, Asia-Pacific, HSBC Global Markets
Date: May 2012
2
Agenda
RMB Internationalisation
Page 3
RMB Trade Settlement Page 7
Development of Offshore RMB
Page 11
Offshore RMB Markets Page 17
RMB FX and Money Market
Page 19
Offshore RMB Bond Market (Dim Sum bonds)
Page 26
RMB Interest Rate Derivatives Market
Page 33
Offshore RMB Initial Public Offering (IPO)
Page 36
HSBC RMB Capabilities and Credentials
Page 38
4
China and RMB – Rise of the redback
China has 1.3 billion (bn) people1, the 2nd
largest economy2
and is the largest exporter
at $1.899 trillion (tn)3
RMB could become the 3rd highest turnover
currency in the world if RMB were fully
convertible 0
500
1000
1500
2000
2500
2009 2010 2011
EU China US Japan UK
Source: HSBC estimate, BIS(1)
Central Intelligence Agency World
Factbook(2)
CEIC, HSBC(3)
Central Intelligence Agency World Factbook; 2011 EU exports The World Trade Organisation(4)
Ministry of Commerce (MOFCOM) –
http://english.mofcom.gov.cn/aarticle/statistic/BriefStatistics/201201/20120107927531.html(5)
Estimate of RMB daily average FX turnover is based on a turnover-to-trade ratio of 0.3, which is lower than 0.32 for EUR, 0.4 for YEN and 0.46 for GBP. The rise in use of RMB will offset the use of USD, EUR, YEN, and GBP at a share of 40%, 30%, 20% and 10%
Nominal GDP (USDbn)2 Exports (USDbn)3
Daily Average Turnover (USDbn)3 Daily Average Turnover (USDbn)3
0
2,0004,000
6,000
8,000
10,00012,000
14,000
16,000
1995 1997 1999 2001 2003 2005 2007 2009 2011
US China Japan EUA 17
$
USD
EUR
RMB GBPJPY
¥
€
¥
0
500
1,000
1,500
2,000
2,500
3,000
3,500
£
2010 Bank for International Settlement (BIS) Data
$
USD
EUR
RMBGBPJPY
¥€
¥0
500
1,000
1,500
2,000
2,500
3,000
3,500
£
2010 BIS Data (if RMB fully convertible)
5
RMB Internationalisation: A three-stage process
Source: HSBC* Details of some measures to be announced(1)
PBoC
–
http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2012/20120108170351045302718/20120108170351045302718_.html(2)
CNH is the name used in the market to refer to offshore deliverable RMB(3)
Actual implementation date to be confirmed(4)
http://online.wsj.com/article/SB10001424052970203986604577257190163679120.html(5)
http://www.centralbanking.com/central-banking/news/2117966/rmb-s-rise-reserve-currency-status-accelerates
More symbolic than material
Accepted across world:
for investment, financing, and payment purposes
as a reserve, intervention and anchor currency
Nigeria has added the equivalent of US$500m in RMB to its reserves4
Chile, Thailand, Brazil and Venezuela are understood to have begun efforts to include RMB in reserve portfolio5
Multi-decade process
A Top GlobalReserve Currency3
JUNE 2009
Pilot launch of cross-border RMB trade settlement scheme
JUNE 2010
Expansion of cross-border RMB trade settlement scheme
AUGUST 2011
Announcement on further expansion of the scheme to nationwide
Trade settled in RMB totaled RMB2.08tn1
in 2011
MARCH 2012
Expansion of RMB export trade settlement from businesses on the Mainland Designated Enterprises (MDEs) list to all companies qualified for external trade3
JULY 2010
Establish of the offshore RMB (CNH2) market in HK
AUGUST 2010
China inter-bank bond market (CIBM) opened to selected offshore RMB Financial Institutions and central banks
JANUARY 2011
Mainland Enterprises can make overseas investment in RMB in the form of ODI
AUGUST 2011Mainland corporate can issue RMB bonds in Hong Kong
OCTOBER 2011
Formalisation
of RMB Foreign Direct investment (FDI)
RMB21bn for 110 projects approved by end December
DECEMBER 2011RMB QFII launched allowing HK subsidiaries of Chinese asset management and securities firms to invest in onshore securities
APRIL 2012
RMB QFII expanded by RMB50bn and allowed to be used in issuing A-share ETFs*
CIBM eligible investors expanded to supranationals, sovereign wealth funds and insurers
MAY 2012Formalisation
of RMB bond issuance in Hong Kong by Mainland non-financial firms
A Top GlobalInvestment Currency2A Top Global
Trading Currency1
6
RMB Internationalisation – Timeline unfolding rapidly
Source: HSBC, Bloomberg, Hong Kong Monetary Authority (HKMA), CSRC(1)
For “Mainland Designated Enterprises”
only in Shanghai, Guangzhou, Shenzhen, Dongguan and Zhuhai(2)
CNH is the name used in the market to refer to offshore deliverable RMB(3)
Actual implementation date to be confirmed
HSBC economics forecast
RMB deposit-taking, cheque, credit / debit card and remittance services starts to be offered in HK
Participating banks can buy / sell RMB through designated clearing bank
HK
banks set own credit limit on RMB cards
HK
shoppers can use RMB cheques in Guangdong
July 2007: Mainland financial institution issue 1st
RMB bonds in HK
(China Development Bank)
Dec 2008: State Council designates pilot RMB trade settlement regions: Guangdong, Yangtze River Delta, HK
RMB trade settlement pilot scheme kicks off in five1
pilot mainland cities with HK, Macau and ASEAN traders
HK
participating banks can provide RMB FX conversion and trade finance to foreign traders settling trade with Chinese traders in RMB
1st
offshore RMB sovereign bond in HK
(MOF)
Mainland subsidiaries of HK
banks allowed to issue RMB bonds in HK
Global roll-out of RMB trade settlement with 20 provinces and cities in the Mainland
Offshore RMB products platform launched in HK
China interbank bond market opened to qualified offshore RMB holders
RMB settlement for capital account items proposed for Shanghai
Surge in global RMB denominated non-trade transactions
Expanding direct quote between RMB and other currencies inside China
Further financial reform to put internal financial house in order…
…paving the way for full RMB convertibility
Surge in global RMB trade
settlement transactions
~USD2trn annual trade flows settled in RMB
Faster growth in China vs. its main trading partners will support the gradual RMB appreciation
RMB’s role in global trade cycle reinforced
RMB Overseas Direct Investment trial launch
The first offshore RMB IPO, Hui Xian REITs listed in April 2011
RMB Fiduciary Account launched
HK Treasury Markets Association (TMA) Spot USD / CNH2
Fixing launched
Cross Border Trade Settlement Scheme expanded to nationwide in China
PBoC and MOFCOM formalised RMB foreign direct investment (FDI) guidelines
Mainland enterprise issue 1st
RMB bonds in HK (November: Baosteel)
2003–2008 2009 2010 2011 2012 2013–2015 2020
HK
subsidiaries of Mainland fund managers launched RQFII funds in Hong Kong
1st RMB Gold ETF launched in HK
All Mainland exporters are allowed to participate in RMB trade settlement without prior approval as a special “Mainland Designated Enterprise”3
RQFII quota increased by RMB50bn, allowing it to be used in issuing RMB A-share ETFs listed in HKEX
PBoC widened the daily trading band of the RMB against the USD to ±1 percent around the central parity
1st
international RMB bond in London
(Apr 2012)
8
RMB cross border trade settlement
Geographical coverage:
RMB Cross Border Trade Settlement Scheme has been expanded to cover the whole country
Chinese enterprises are eligible to conduct trades in RMB:
All entities in approved cities and provinces can pay out RMB under import
All entities in approved cities and provinces can receive RMB under services export (no export tax rebate required)
Since 30 November 2010, 67,359 Mainland Designated Enterprises (MDEs)1
can receive RMB under mercantile export (export tax rebate required)
In March 2012, PBoC, MOF, MOFCOM, China Customs, State Administration of Taxation, and China Banking Regulatory Commission (CBRC) announced that the MDE list will be
replaced by a list of enterprises for enhanced supervision
Criteria for listing are violations or alleged violations of laws and regulations in the past two years
Entities on the list will be subject to scrutiny by banks and authorities when conducting RMB export trade settlement
Once effected, all entities qualified for foreign trade can receive RMB under export2
Transaction eligibility:
Banks and authorities in China will conduct transaction validationSource: PBoC –
http://www.pbc.gov.cn/image_public/UserFiles/goutongjiaoliu/upload/File/(新)中国人民银行%20财政部%20商务部%20海关总署.doc(1) http://www.pbc.gov.cn/publish/huobizhengceersi/3131/2010/20101206180211690483523/20101206180211690483523_.html(2) Actual implementation date to be confirmed
9
How does the scheme work
(1)
CNH is the name used in the market to refer to offshore deliverable RMB
Importers and exporters open RMB accounts with participating banks
They can buy / sell RMB under trade settlement of physical goods
with the participating banks
RMB can be remitted to China for trade settlement. Eligibility is determined by the onshore banks or regulators
RMB received from China should have been approved by Chinese authorities
Participating banks need to open a RMB account with clearing banks, either in Hong Kong, Macau or Mainland correspondence banks in China
Participating banks can square FX position arising from trade settlement with the clearing bank subject to requirements set by the relevant regulatory authorities
Each clearing bank has a quarterly quota on the net amount that it sells to or buys from participating banks
If the quota is fully utilised, participating banks need to go to the offshore market, that is, the CNH1 market
CNH1
are good for payment to China. It is not the source but the purpose that matters
10
RMB accounts
Offshore corporate can now open RMB account(s) with banks worldwide, for both trade and general purposes
Transfer of RMB funds (limited to offshore only) between different accounts are allowed in Hong Kong
RMB exchange / risk management
As offshore corporates seeking to use RMB as one of the currencies for their operations, foreign exchange risk management will be important
Due to the need for participating banks to adhere to the conditions stipulated under the Clearing Agreement, offshore corporates will need to be aware that a two-tier exchange market for RMB now exists; one market rate for RMB exchange for trade settlement purposes (subject to the quota of the clearing bank) and the other rate for general purposes
RMB Non-deliverable forward (NDF) and Non-deliverable option (NDO) continue to exist but offshore RMB deliverable forward (DF) and deliverable option market have started to take off with steady improvement in liquidity. Price level between NDF and DF are increasingly converging, but the latter has already become the tool of choice for many investors seeking to hedge against RMB volatility
RMB borrowing / financing
Besides the RMB trade financing facilities, all other type of loans in RMB are also available to corporates. Offshore corporates can also issue bonds denominated in RMB
Note that the RMB proceeds obtained from all non-trade financing related facilities including loans and bonds can be remitted back for use in China when the offshore corporates have obtained approval from the relevant authorities in China
RMB investment
There is no restriction with regards to the use of the accumulated RMB funds by offshore corporate provided the funds are not remitted back into the Mainland China
In terms of banking products, the accumulated RMB in the offshore RMB accounts can be invested in bank deposits, RMB bonds or certificate of deposits (CDs) issued offshore, FX-linked structured deposits, commodity-linked structured deposits, equity-linked structured deposits, interest rate-linked structured deposits, RMB-
denominated funds, RMB equities products and exchange-traded funds
Implications for offshore corporate
12
Chronology of events relating to RMB liberalisation
Source: HSBC, Bloomberg, Hong Kong Monetary Authority (HKMA), PBoC, CSRC(1)
CNH is the name used in the market to refer to offshore deliverable RMB(2)
Actual implementation date to be confirmed
2011
June: –
The PBoC issued a Notice on Relevant Issues on RMB Cross-Border Business announcing the monitoring requirements on overseas participating banks to monitor RMB cash movement if the RMB is converted from foreign currency.
Further, the procedure is provided for overseas investors to make foreign direct investment (FDI) in Mainland China
–
The Treasury Markets Association launched the Spot USD / CNH1
Fixing. The Fixing provides a reference rate for the pricing of
RMB products in the offshore market and serve as a benchmark for the market exchange rates of
USD against CNH1
at 11am Hong Kong time
August–
The Cross Border Trade Settlement Scheme is expanded to nationwide in China–
Policies announced by Vice Premier Li Keqiang on RMB QFII and RMB Exchange-traded Fund. Formal guidelines for the latter are yet to be announced
October–
Promulgation of RMB FDI rules by MOFCOM and PBoC
December–
Renminbi QFII was officially launched following a joint announcement by The Chinese Securities Regulatory Commission (CSRC), State Administration of Foreign Exchange (SAFE) and PBoC, allowing Hong Kong subsidiaries of Chinese asset management and securities firms to invest no less than 80% of the approved amount in fixed-income products and no more than 20% in equity and equity funds
2012
January: –
The HKMA and the UK Treasury announced the launch of a joint private-sector forum to enhance cooperation between Hong Kong and London
on the development of offshore RMB business. The HKMA is also working to extend the RMB RTGS system to 15 hours, from 08:30 to 23:30 (Hong Kong time) by end-
June. This will give FIs in the European time zone an extended window to settle offshore RMB payments–
The HKMA allowed Participating AIs to include, in addition to RMB cash, balance with Clearing Bank and balance in Fiduciary Account, their holding of offshore RMB sovereign bonds and RMB bond investment in the China interbank bond market (CIBM) in the calculation of the risk management limit. The HKMA also adjusted the limit for RMB net open position (NOP) to 20% from 10%
February: –
The HKMA adjusted the calculation of the statutory liquidity ratio, allowing AIs to include more RMB liquefiable assets in the calculation of the statutory ratio subject to certain conditions
March: –
PBoC, MOF, MOFCOM, China Customs, State Administration of Taxation and China Banking Regulatory Commission (CBRC) announced that
RMB Cross Border Trade Settlement for exports will be expanded to all companies qualified for foreign trade and the list of MDE will be replaced by a watchlist system2
April:–
HKMA streamlined AIs' KYC and DD procedures for RMB position squaring with the RMB Clearing Bank for trade-related conversions. For corporate customers meeting certain criteria, AIs can apply appropriate KYC and DD procedures instead of reviewing supporting documents.
–
CSRC, PBoC and SAFE increased RQFII quota by RMB50bn, allowing it to be used in issuing RMB A-share ETF listed in HKEX–
PBoC widened the daily trading band of the RMB against the USD to ±1 percent around the central parity
May:–
The National Development and Reform Commission (NDRC) formalised
the rules for Mainland non-financial firms to issue RMB bonds in Hong Kong
13
Offshore RMB – Experience in Hong Kong
Source: HSBC, HKMA -
http://www.hkma.gov.hk/media/eng/doc/key-information/press-release/2011/20120430e5a1.pdf, (1)
HKMA –
http://www.hkma.gov.hk/media/eng/doc/key-functions/monetary-stability/rmb-business-in-hong-kong/hkma-rmb-
booklet.pdf?bcsi_scan_A61131364D8D33B1=MDtChdMp5RqXsn2YFP+Tjaj3qAs1AAAA65h8xQ==&bcsi_scan_filename=hkma-rmb-booklet.pdf
Hong Kong has the largest pool of offshore RMB funds, with RMB deposit reaching RMB554.3bn at the end of March 2012
March saw RMB deposit fall 2.1% m-o-m
as more deposits were placed in real assets
About 70% of the deposits were held by corporate customers, over
15% of which were from overseas1
Outstanding RMB loans in Hong Kong ballooned to RMB42bn by the end of March from RMB30.8bn at the end of last year, according to the HKMA
RMB trade settlement in Hong Kong has increased exponentially, up from a total of RMB369.2bn in 2010 to RMB1,914.9bn in 2011
Hong Kong banks handled over 90% of Mainland’s RMB trade transactions in 2011
China’s external trade settled in RMB increased 4 times from RMB506.3bn in 2010 to RMB2.08tn in 2011, 9% of China’s external trade
RMBbn
100
200
300
400
500
600
700
0
Jul-0
9
Aug-
09
Sep-
09
Oct
-09
Nov
-09
Dec
-09
Jan-
10
Feb-
10
Mar
-10
Apr-
10
May
-10
Jun-
10
Jul-1
0
Aug-
10
Sep-
10
Oct
-10
Nov
-10
Dec
-10
Jan-
11
Feb-
11
Mar
-11
Apr-
11
May
-11
Jun-
11
Jul-1
1
Aug-
11
Sep-
11
Oct
-11
Nov
-11
Dec
-11
Jan-
12
Feb-
12
Mar
-12
0
50
100
150
200
250
Time Deposit (LHS) Demand and Savings Deposit (LHS) RMB Trade Settlement (RHS)
14
Mainland China
Onshore/offshore connectivity and convergence
1.
Access to onshore interbank bond market
Announced in Aug 10 by PBoC
Allowed central banks, clearing banks and participating banks to access the onshore market via quota
In April 2012, eligible investors expanded to supranationals, sovereign wealth funds and insurers
2.
RMB Foreign Direct Investment
Ministry of Commerce and PBOC formalised the procedure on the transfer of RMB back to China under FDI and shareholder loans in Oct 11
RMB47bn in 1Q 20123.
R-QFII
Officially launched in Dec 11. Initial quota size of RMB20bn. 21 HK subsidiaries of Chinese securities houses approved
In April 12, quota increased by RMB50bn, allowing it to be used in issuing A-share ETFs listed in HKEX
1.
RMB Outward Direct Investment
Announced in Jan 11 by PBoC
RMB2.9bn in 1Q 20122.
Mainland corporate to issue dim sum bond
In May 2012, NDRC formalised the rules for Mainland non-financial firms to issue RMB bonds in Hong Kong3
3.
Exchange-traded Fund (ETF)
Details to be announced soon
(1)
PBoC
–
http://www.pbc.gov.cn/image_public/UserFiles/goutongjiaoliu/upload/File/2011年第四季度中国货币政策执行报告(1).pdf(2)
Investment rules and allocation of the increased quota have yet to be announced(3)
http://www.ndrc.gov.cn/zcfb/zcfbtz/2012tz/t20120508_478219.htm
OFFSHORE ONSHORE
15
RMB in the World
UAE
Belarus
Indonesia
Iceland
SingaporeMalaysia
New Zealand
UzbekistanMongolia
Kazakhstan
South Korea
Hong KongThailand
Pakistan
Turkey
Argentina
London•
Formal backing from China to become an offshore RMB trading centre
•
UK Treasury and HKMA announced the launch of a joint private-
sector forum in January to enhance cooperation between Hong Kong
and London on development of offshore RMB business•
The RMB settlement system in Hong Kong will be extended in June 2012 to give FIs in the European time zone an extended window to
settle offshore RMB payments through the Hong Kong infrastructure
Japan•
The leaders of China and Japan agreed to promote the use of RMB and JPY in cross-border transactions;
•
Support development of direct exchange markets between RMB and JPY;
•
Support Japanese companies in issuing RMB-denominated bonds in•
Tokyo and other overseas markets; and•
Support Japanese authority to invest in Chinese government bonds
Dubai International Financial Centre (DIFC)•
Expected to permit transactions in RMB this year •
Allow companies to use RMB instead of USD or EUR for non-oil trade
•
UAE’s oil exports to China is expected to continue to be settled in USD
Countries / regions with currency swap agreements with China
Countries / regions that are developing their offshore RMB capabilities
Source: HKMA –
http://www.hkma.gov.hk/eng/key-information/press-releases/2012/20120116-3.shtml, PBoC –
http://www.pbc.gov.cn/publish/english/955/2011/20111225173248498166576/20111225173248498166576_.html, Reuters
Russia
BRICS•
China Development Bank signed two pacts/agreements with the other BRICS nations’
development bank during the Annual BRICS Summits in New Delhi on March 2012
•
CDB will extend RMB loans to other BRICS nations•
Aims to boost trade between the five nations and reduce demand for fully convertible currencies for transactions among BRICS nations
China
Australia
16
What has happened to RMB?
RMB band widening
PBoC widened the daily trading band of the USD-CNY exchange rate to +/-1% from a previous width of +/-0.5%
The last time the band was widened was in May 2007, when the band was increased from +/-0.3%
HSBC Comments:–
Unlikely to see the market respond by increasing expectations for greater appreciation–
Gradual increase in intraday volatility, though it may not necessarily utilise
the full newly expanded range–
Lower CNY-CNH divergence as onshore USD-CNY now has more flexibility to follow USD-CNH
Less appreciation, more volatility
Cyclically inflation has come weaker than market had expected (March CPI remains below Beijing’s 4% target)
Structural surplus is rapidly narrowing, latest trade-surplus-to-GDP read falling to new low of 1.9% on latest print
HSBC Forecast: –
Cyclical and structural forces for appreciation have weakened further–
Adjust our year-end 2012 forecast of USD-CNY to 6.18 or less than 2% appreciation from 3% over the calendar year
Faster liberalisation
RQFII quota expanded to RMB70bn from RMB20bn
Abolishment of the Mainland Designated Enterprise (MDE) white list, fully opening cross-border RMB trade settlement channel
HSBC Comments:–
Authorities appear to be taking advantage of relative equilibrium in USD-RMB to accelerate liberalisation–
Wider and more numerous cross-border channels mean less CNY-CNH divergence but more variability in offshore CNH deposit base growth
Source: HSBC Global Research "Asian FX : RMB band widening -
even more flexibility, 14 April 2012“, “Asian FX : RMB... even less appreciation, 11 April 2012”, “China March CPI: Edgingup temporarily, 9 April 2012”, “Asian FX : RMB -
faster liberalisation, 5 April 2012”
18
One currency, two systems, three curves
One currency: Renminbi (RMB), literally ‘People’s money’
and sole legal tender in PRC
Two systems:
The two separate jurisdictions create separate supply and demand conditions for the RMB markets (onshore and offshore), which are accessible to two pools of participants
Three separate curves: CNY, CNH, NDF–
CNY (onshore deliverable RMB)
Highly regulated
Onshore (residents), permitted offshore investors (Foreign Direct Investment, Qualified Foreign Institutional Investor)
Accessible under cross border trade settlements and personal RMB
business in Hong Kong–
CNH (offshore deliverable RMB)
Mostly liberalised
with no restriction on conversion to corporates
Primarily traded on the Hong Kong interbank market, with growing
trading activities in other financial centers, for example, London
Offshore participants, can be used for investment, trade settlement or general purposes–
NDF (offshore non-deliverable RMB)
US Dollar settled in non-deliverable market for risk management
Strictly offshore, but link to the onshore CNY market for fixing
20
Offshore market is often being referred as CNH1
Market turnover increased gradually to around
USD1.4bn daily
Recent RMB band widening helps to a lower CNY-
CNH divergence2
Widening of the USDCNY daily trading band
allowed more flexibility with increased volatility
During periods of risk off and particular USD
demand, onshore USDCNY has more
flexibility to move upwards
CNY-CNH divergence under such circumstances may be more limited
FX spot
Note:(1)
CNH is the name used in the market to refer to offshore deliverable RMB(2)
HSBC Global Research "Asian FX : RMB band widening -
even more flexibility, 14 April 2012“Source: HSBC, Reuters
6.26
6.31
6.36
6.41
6.46
6.51
6.56
6.61
6.66
6.71
6.76
6.81
21-J
ul
18-A
ug
15-S
ep
13-O
ct
10-N
ov
08-D
ec
05-J
an
02-F
eb
02-M
ar
30-M
ar
27-A
pr
25-M
ay
22-J
un
20-J
ul
17-A
ug
14-S
ep
12-O
ct
09-N
ov
07-D
ec
04-J
an
01-F
eb
29-F
eb
28-M
ar
25-A
pr
Offshore Onshore
Mid-October 2010: CNH1
was traded at a premium as much as 3% at one point due to speculation of RMB reveluation
22 September 2011: CNH1 was traded at a discount as much as 2.5% due to USDCNH1 short-
covering on risk aversion
21
FX forward market – Mechanics of three different curves
CNY
–
Onshore deliverable forward
Restricted access by onshore entities under
current account transactions
CNY forward curve now is in line with the interest
differentials as SAFE removed the amount of FX
forwards that a bank can hold
NDF –
Offshore
non-deliverable forward
Expectation of RMB depreciation (currently
build-in 0.7% in 1 year’s time)
Accessible by any individuals and entities
outside China
CNH1
–
Offshore
deliverable forward
Behaved like a standard liberalised
FX forward curve, reflecting USD and
offshore RMB interest rate differentials
Improved efficiency and growing market liquidity
Data as of 10 May 2012Note:(1)
CNH is the name used in the market to refer to offshore deliverable RMBSource: HSBC, Reuters
6.30
6.32
6.34
6.36
6.38
6.40
SPOT 1M 2M 3M 6M 9M 12M
DF NDF Offshore DF
22
Onshore Deliverable Market
Offshore Non-
deliverable Forward
Offshore Deliverable Market
Daily Turnover (spot)1 USD25bn N/A USD1.4bn
Daily Turnover (forward)1 USD3bn USD4bn USD5bn
1yr forward level 6.33915 6.3545 6.39925
1yr bid-ask spread1 100pips 30pips 30pips
Settlement Delivery USD net settlement Delivery
Fixing No fixing 2 business days ahead of maturity
Spot USD / CNH2
fixing at 11:00am HKT
Fixing source N/A Reuters page SAEC Reuters page CNHFIX=
Market players Restricted to Local Entities outside China Entities outside China
Source: HSBC(1)
Estimated Figures(2)
CNH is the name used in the market to refer to offshore deliverable RMBData as of 10 May 2012, spot CNY at 6.3123, spot CNH at 6.315
Summary of the forward curves
23
RMB offshore money market
Until recently, not a very active market as most
banks are long in customer deposits
Market is expected to pick up on the back of
favorable regulatory developments
Eight banks are publishing daily CNY(HK) interbank
offer rates on the Treasury Markets
Association (TMA)'s website
Syndicated loans could pick up as an RMB
HIBOR is formed
Lower interest rates offshore provides an
incentive for Mainland corporates to borrow
offshore
Individuals are not allowed to borrow RMB in
Hong Kong
Data as of 10 May 2012
Source: Reuters
24
RMB FX derivatives – Market at a glance
A growing market
–
Offshore NDF (CNY) is still by far the
most liquid for options with
turnover continued to grow
–
Offshore deliverable RMB (CNH) volatility
(‘vol’) trading is growing in fast pace
with interest seen from both hedging
and investment perspective
–
Onshore FX options (CNO) market started
on 1st
April 2011
DateOnshore RMB
(CNO)Offshore NDF
(CNY)Offshore Deliverable
(CNH)
August
2010
Standard spot ticket USD5–10m N/A USD1–2m
Spot daily turnover USD20–30bn N/A USD50m
Bid / Offer 0.0005–0.0010 N/A 0.0200
FX Options? No Yes Yes
Standard Option ticket N/A USD50m USD5m
FXO Daily Turnover N/A USD1bn USD10m
Vol
Bid / Offer N/A 0.20 2.00
Max Tenor N/A 7 years 1 year
May
2012
Standard spot ticket USD5–10m N/A USD10m
Spot daily turnover USD20–30bn N/A USD1.1bn
Bid / Offer 0.0005–0.0010 N/A 0.0010
FX Options? Yes (European style) Yes Yes
Standard Option ticket USD10m USD50m USD50m
FXO Daily Turnover USD50m USD2.5bn USD1bn
Vol
Bid / Offer 0.30 0.10 0.20
Max Tenor N/A 7 years 5 years
Fixing Mechanism Physical delivery Fixing off SAEC Physical delivery
25
Deliverable RMB Products Non-deliverable RMB Products
FX Product Components
Spot FX (for trade as well as for general purposes)
Deliverable Forward (for general purpose)
Deliverable Option (for general purpose)
Non-deliverable Forward
Non-deliverable Option
Product Capabilities
Vanilla, European and discrete barriers, callable variations, target redemption variations and any structured forwards offered by HSBC
Baskets
Vanilla and Barrier options on other currencies quanta to CNH1
(e.g. AUD/USD DNT quanta to CNH1)
FX Indices
Vanilla, European and discrete barriers, callable variations, target redemption variations and any structured forwards offered by HSBC
Baskets
Vanilla and Barrier options on other currencies quanta to CNY (e.g. AUD/USD DNT quanta to CNY)
FX Indices
Wrappers
OTC in HK, London & selected centers*
Structured Deposit in HK, London & selected centers*
Structured Note using HSBC HK or London as issuer
OTC
Structured Deposit
Structured Note using HSBC HK or London as issuer
Selected Credentials
1st spot USDCNH1
deal in market
1st CNH1
FX option traded in market (Oct 2010)
Amongst the 1st
globally to trade deliverable RMB structured deposit
1st CNH1
Multicallable Forward traded in market (Jun 2011). Over CNH1
20bn of volume traded of multicallable and target redemption variations
1st FX-linked index with CNH1
as component traded in market (with European client)
HSBC’s offshore RMB FX capabilities
HSBC played a leading role in driving the rapid
product development in CNH1
market
HSBC offers a complete panel of solutions to
match clients’
investments, financing and risk management
needs
*Availability varies based on transacting HSBC entity (1)
CNH is the name used in the market to refer to offshore deliverable RMB
27
What are Dim Sum bonds
Dim Sum bonds:
RMB bonds issued outside China
Issuers
Chinese government or state-owned entities e.g. Ministry of Finance (MOF), CDB, Chexim, Baosteel Group
Chinese entities incorporated offshore e.g. China Eastern Airline, Far East Horizon, Ping An, CNPC
Hong Kong entities e.g. New World, Hopewell, Galaxy, MTRC
Chinese high yield and non-rated issuers e.g. China Shanshui, PCD Store
Multi-nationals, supranational and overseas banks e.g. KfW, HSBC Bank plc, America Movil, Lotte Shopping, Hitachi, Ford, Emirates NBD, IFC, VW, TESCO
Investors
Used to be retails, private banking customers, commercial banks in Hong Kong
Growing interests from global institutional investors including fund managers, insurance companies
Recent development
Wider choice of issuer profile (Government, Quasi-Sovereign, HK blue-chips, H-share listed, multi-nationals, etc)
Wider choice of risk appetite (Government, investment grade, high yield, emerging markets, etc)
Extension of yield curve (to 15 years)
First Basel III-compliant lower tier two sub debt issued by ICBC Asia
First Latin American issuer and first ever executed under an SEC-registered shelf by America Movil
First international RMB bond in London by HSBC Bank plc
28
RMB bond market dynamics – Summary
Offshore RMB Market (in Hong Kong and London) Onshore RMB Market (in PRC) Current & Eligible Issuers
Any offshore financial institutions or corporates
Approved Mainland China
financial institutions (“FIs”) and corporates
Government and Government supported issuers: MOF, PBOC, local government, Central Huijin
and Ministry of Railway.
Onshore financial institutions: policy banks, commercial banks, insurance companies, etc.
Onshore Non-financial institutions: subject to NAFMII registration and issued via underwriting group (CPs, MTNs, SCPs); subject to PBoC
and SPDC review and issued via underwriting group (enterprise bonds); subject to CSRC review and issued via underwriting group (corporate bonds)
Multi-national agent: subject to individual approvalMarket size
Gross issuance for 2011 is RMB189.3bn
YTD gross issuance: RMB103bn
Total issuance size is over RMB50 trillion since 2005
Over RMB6tn new issuance in 2011 Jan-DecInvestor Base
Retail investors
Fund managers, banks, private banks, insurance companies and corporates
Onshore investors: commercial banks, policy banks, fund managers, insurance companies, corporates, securities houses
CIBM eligible investors: Central banks or monetary authorities, RMB clearing banks, participating banks, supernationals, sovereign wealth funds, insurers
RQFIIsUse of Proceeds
For approved Mainland issuers, proceeds can be brought onshore
For offshore issuers, proceeds are to be kept offshore (except those with approval from China regulators to bring funds onshore)
Proceeds kept in Mainland China
Recent Developments
Rapid development of the offshore (CNH1) market in 2011. Gross issuance at RMB189bn was more than triple the previous year’s level
NDRC formalised the rules for Mainland non-financial firms to issue RMB bonds in Hong Kong
Taiwan banks’
overseas branches allowed to invest in offshore securities issued by the Mainland government and related parties
The HKMA, BNM and Euroclear launched a platform to link domestic
bond investors. Investors in HK and Malaysia can purchase Dim Sum bonds and Islamic sukuk on a delivery-versus-
payment basis. Cross-border, cross-currency collateral management services will allow institutions based outside HK to borrow HKD or RMB by pledging securities held by Euroclear. Bank of China Malaysia was appointed as Onshore Settlement Institution (OSI) in Malaysia.
A standardised
framework to conduct FDI in RMB has been in place since October
2011. The streamlined process has provided a systematic approach for the application
Further enhancement in products liquidity in recent years
Rapid development of credit bond market in both length and depth, both in CIBM and exchange market. Total credit bond issue size developed quite fast to RMB2.2tn
Further expansion in investor scope, allowing more offshore investors in. In Dec 2011, first batch of RQFII was launched which totals RMB20bn
Ministry of Railway became government supported issuer and its enterprise bonds issued in 2011-2013 enjoyed half income tax reduction.
Recent Issues (examples)
2012
KfW –
RMB1bn 2yr 2%(Largest CNH issue from a non-Asian SSA issuer)
HSBC Bank Plc –
RMB2bn 3yr 2.875% (First international RMB bond)
RBI –
RMB750m 2yr 4.55% (Debut CNH issue of Raiffeisen Bank International)
Hitachi –
RMB500m 3yr 3.75% (Second offshore RMB bond issuance by a Japanese company)
Ford –
RMB1bn 3yr 4.875% (First CNH1 issue from a non-Asian high-yield issuer)
Emirates NBD –
RMB750m 3yr 4.875% (First CNH1
issue from a Middle East issuer)
Alstom –
RMB500m 3yr 4.25% (First ever non-Euro denominated bond by Alstom)
America Movil –
RMB1bn 3yr 3.5% (First ever RMB issue in SEC Registered format)
China Development Bank -
RMB1.5bn 15yr (First ever 15-year bond in the CNH market)
2011
MOF: RMB28bn 3yr bonds at 2.82% on 07 Dec 2011
PBOC: RMB4bn 1yr bonds at 3.4875% on 27 Dec 2011, the last issue
till now.
CDB: RMB15bn 3+7yr puttable
bonds at 3.49% on 16 Dec 2011
AGDB: RMB222bn 7yr fixed bonds at 3.74% on 15Dec 2011
Ministry of Railway: RMB20bn 10yr fixed bonds at 4.99% on 22 Nov
2011
Anshan Iron and Steel: RMB4bn 1yr commercial papers at 5.55% on 07 Nov 2011.(HSBC is one of the underwriters)
China National Building Material Group Corp: RMB5bn 3yr MTN on 05 Dec 2011.(HSBC is one of the underwriters)
Provincial/Municipal Government: Shanghai issued RMB3.6bn 3yr and 3.5bn 5yr respectively at 3.10% and 3.30% in Nov 2011
Provincial/Municipal Government: Guangdong issued RMB3.45bn 3yr and 3.45bn 5yr respectively at 3.08% and 3.29% in Nov 2011
Provincial/Municipal Government: Zhejiang issued RMB3.3bn 3yr and 3.4bn 5yr respectively at 3.01% and 3.24% in Nov 2011
Provincial/Municipal Government: Shenzhen issued RMB1.1bn 3yr and RMB1.1bn 5yr respectively at 3.03% and 3.25% in Nov 2011
Source: HSBC(1)
CNH is the name used in the market to refer to offshore deliverable RMB
29
Overview of offshore RMB bond market
Under the favorable regulatory and interest
rate environment, the offshore RMB bond
market has developed rapidly in
recent years
Tenors less than 3 years account for 95% of new issuance indicating the
strong demand for short tenors
HSBC forecasts RMB260-
310bn gross issuance
and RMB400-450bn market size by the end
of 2012
In terms of issuer type, HSBC believes Chinese
entities, including sovereigns, banks, and
corporates, will continue to dominate issuance in
this space
(1)
Excluding synthetic RMB bond issuances
2007-2012 RMB Bonds/CD Issuance, by country New issuances by Issuer Typre
(2011)1
Issuance Size (RMBbn)
New issuances by Tenor (2012 YTD)1 New issuances by Issuer Typre
(2012 YTD)1
Less than 1-year (33%)
1-year (33%)
2-year (10%)
3-year (19%)
5-year (2%)
More than 10-year (3%)
Sovereigns (0%)
Supranationals (0%)
Chinese Fis (76%)
Corporates (4%)
Foreigns Fis (9%)
MNC (11%)
Sovereigns (11%)
Supranationals (0%)
Chinese Fis (42%)
Corporates (32%)
Foreigns Fis (5%)
MNC (10%)0
50
100
150
200
250
300
2007 2008 2009 2010 2011
Mainland China Hong Kong Non-Chinese Entity Expected
Announcement Date2012
30
Issuer qualification
Any offshore entity as long as it qualifies the general bond issuing criteria in the Hong Kong/international bond market
Any onshore Chinese entity should obtain relevant regulators’
approvals
Use of proceeds
If the issuer intends to bring back onshore for capex and / or general working capital purpose, the remittance exercise is subject to Mainland authorities approvals
If the issuer intends to use the proceeds outside of Mainland China:
For trade settlement: the issuer needs to figure whether it has receivables in RMB for natural hedge, otherwise, it will be exposed to foreign exchange risk
For swap into USD: the USDCNH1
Cross Currency Swap (“CCS”) market is liquid up to 3 years with monthly turnover approaching USD3bn and a maximum possible tenor of 10 years with reduced liquidity
Issue Ratings
Preferred
Listing
Preferred
Marketing
It is recommended that the issuer could meet the key potential investors in Hong Kong and Singapore via marketing roadshow
For high quality names, the issuer could also choose to conduct investor calls with regional investors if travel is not convenient
HSBC will also help the issuer to upload the roadshow presentation to NetRoadshow to maximise the investor coverage
Documentation
Standalone Regulation S documentation or off EMTN programme
Necessary changes should be made to EMTN programme to include settlement via Central Moneymarket Unit (CMU)
Clearing system
CMU
Euroclear
Issuer’s considerations
Key considerations for issuers looking to tap the international RMB
bond market
(1)
CNH is the name used in the market to refer to offshore deliverable RMB
31
Introducing HSBC offshore RMB bond index (CNH1
Index)
HSBC CNH1
index is launched as part of the HSBC Asian Local Bond Index (ALBI)
CNH1
Index tracks total return performance of RMB-
denominated and settled bonds and certificates of deposit issued outside of the PRC
The index accounts for slightly over 10% of the ALBI-
China sector and 1% or the overall ALBI
Inception date: 31 December 2010
Inclusion criteria:
Fixed rate straight bonds and CDs (ie exclude synthetic bonds / floaters / bonds with embedded options)
At least one year remaining to maturity
Minimum outstanding amount: RMB500m
Institutional tranches only (ie exclude retail bonds)
As of May 2012Source: HSBC(1)
CNH is the name used in the market to refer to offshore deliverable RMB
Included in HSBC CNH index (51%)
Retail bonds (3%)
Floaters (exclude Retail) (1%)
Other (45%)
32
95
97
99
101
103
105
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12
TR (UDS) TR (RMB) Capital Gain
CNH1
Index results
Source: HSBC, Data as of 10 May 2012(1)
CNH is the name used in the market to refer to offshore deliverable RMB
Tickers 12/31/2010 5/10/2012
Total Return in USD HCNHUSD 100.00 104.71
Total Return in RMB HCNHACUM 100.00 100.28
Avg Clean Price HCNHACP 100.00 96.50
Avg Duration (years) HCNHAD 3.00 2.74
Avg Yield (%) HCNHAY 2.28 4.28
Market Cap (RMBm) HCNHAMC 29,915 141,884
Avg Life (years) HCNHAL 3.23 3.01
Avg Coupon (%) HCNHAC 2.63 3.39
Return since inception
Total return in USD 4.71%
Total return in RMB 0.28%
Return from FX 4.43%
Return from capital gain -3.50%
Return from coupon 3.79%
Total return of CNH1
bonds in USD and RMB terms
Capital loss
FX
Coupon
34
A lending benchmark is absent in the offshore CNH1
market, borrowing and lending are done on a fixed rate basis or reference to an onshore benchmark
CNH1
IRS provides an interest rate hedging tool for clients wishing to convert fixed rate loan into floating or vice versa
CNH1
IRS is available using 3m SHIBOR as benchmark, with other indices can also be applied on a case by case basis
CNH1
SHIBOR IRS market is at a beginning stage of development with a maximum tenor of 10yrs
Currency Swap in RMB fixed vs USD floating format with all cash flows settled in USD using SAEC page
Typical NDS have back end exchange only, giving it FX exposure
NDS is a natural extension of the NDF market, pricing is mostly driven by FX expectations
Maximum tenor can go up to 10yrs, with consistent liquidity up to 5yrs
NDIRS is a pure interest rate hedging tool in RMB fixed vs RMB floating format, all cash flows settled in USD using SAEC page
HSBC is capable of quoting NDIRS against all available indices –
7d Repo / 3m SHIBOR / 1y Depo / 1y Lending
7d Repo NDIRS has the best liquidity, followed by 3m SHIBOR NDIRS
Maximum tenor can go up to 10yrs, with consistent liquidity up to 5yrs
RMB interest rate derivatives market
(1)
CNH is the name used in the market to refer to offshore deliverable RMB
Non-Deliverable Market –
NDS
Non-Deliverable Market –
ND Interest Rate Swap (NDIRS)
Deliverable CNH1
Market –
Interest Rate Swap (IRS)
35
Data as of 10 May 2012
Source: HSBC(1)
CNH is the name used in the market to refer to offshore deliverable RMB
Deliverable CNH1
Market –
USDCNH1
CCS curve
Currency Swap based on RMB fixed vs. USD float
format, with physical settlement of CNH1
vs
USD
USDCNH1
CCS have both front end and back end
exchange
The CCS market is an extension of the USDCNH1
FX Swap market, driven by interest rate differential and
the supply and demand of bond / loan hedging
activities
The USDCNH1
CCS market has experienced strong
growth since its inception in 2010, with monthly
turnover approaching USD 3bn, market is liquid up to
3yr, with a maximum possible tenor of 10yr with
reduced liquidity 1.50%
1.60%
1.70%
1.80%
1.90%
2.00%
2.10%
2.20%
2.30%
6M 9M 12M 18M 24M 30M 36M
USDCNH CCS
37
Offshore RMB IPO
An RMB equity product refers to an equity product that is priced, traded and settled in RMB. Its price and dividends/distributions are denominated and paid in RMB
HSBC is one of the joint listing agents of the first RMB IPO listed on the main board of the Stock Exchange of Hong Kong in April 2011. Upon the listing of the first RMB IPO, most of the participants of an RMB IPO have their systems enhanced and are ready in dealing and / or clearing transactions in RMB securities in Hong Kong. In anticipation of RMB appreciation in the near future, higher demand for RMB equity products is expected
Superior distribution platform, consistently outselling in IPO transactions
Long standing track record of executing RMB denominated products
Lead bank who has pioneered the first RMB IPO
Capabilities to provide a total solution to both issuers and investors
Team of committed and highly experienced senior industry professionals
Introduction HSBC –
your partner of choice for RMB IPOs
39
HSBC trades GBP CNH3
structured forward with UK corporate client
First CNH3
dual currency investment offered to retail investors in Singapore
First FX index linked to CNH3
traded with European fund manager
Acted as joint listing agent for first offshore RMB IPO Hui Xian REIT
First CNH3
Multicallable Forward traded in the market
First CNH3
Dual Currency deposit traded in Japan
HSBC trades CNH3
FX option in Germany
Offshore RMB Products1 Onshore RMB Products (China)2
Payments and Cash Management
No restriction on account opening
No restriction on account opening
Custody
RMB Custody and Funds Administration Services
RMB Custody and ClearingExchange Services and Risk Management Products
Spot FX (for trade / general purposes)
Deliverable FX Forward, FX Option and FX Swap
Deliverable Interest Rate Swap, Cross Currency Swap and Interest Rate Swaptions
Non Deliverable Forward
Non Deliverable Option
Spot FX
Forward FX
FX swaps
Interest Rate Swap and Cross Currency Swap
Credit Risk Mitigation Agreement / Warrant
FX optionsBorrowing / Financing Products
Trade financing facilities and commercial loans
Issuance of offshore RMB bonds / certificate of deposits (CDs)
Trade financing facilities and commercial loans
Money MarketInvestment Products
Time deposit, CDs
Primary and secondary RMB bonds trading
FX linked structured deposit
Interest rate linked structured deposit
Equity linked structured deposit
Gold linked structured deposit
RMB investment funds
RMB equities
RMB RQFII funds
RMB gold ETF
Time deposit
Call deposit
Structured deposit
Bonds
Non-financial bonds
HSBC’s RMB capability
RMB ‘Going Out’
–
HSBC –
your bank of choice in international RMB business
(1)
Offshore RMB products currently available in HSBC Hong Kong. Products may vary in other regions(2)
There are certain restrictions on the types of clients to which the products can be offered(3)
CNH is the name used in the market to refer to offshore deliverable RMB
March 2011 March 2011 April 2011 June 2011 July 2011 Aug 2011 Nov 2011
40
Fixed income product range
Source: HSBC(1)
CNH is the name used in the market to refer to offshore deliverable RMB
RMB (or CNH1) Cash Notes / Bonds
RMB (or CNH1) Certificates of Deposits Synthetic RMB Bonds
Structured Notes / Deposits
USD Total Return Swap Linked to CNH1
Bonds
Description CNY-deliverable bonds issued in Hong KongCurrently there is a diverse range of CNH1
issuers including Chinese policy banks, multi-nationals, corporates and foreign banks
CNY-deliverable CD issued in Hong KongBanks who are Authorised
Institutions in Hong Kong can issue CNH1
debt in CD formats. Currently the issuers are generally Chinese banks with its Hong Kong branches as the issuing entity in the CNH1
CD market. The documentation will be relatively less complicated when compare with MTN Cash Notes / Bonds
RMB-denominated, USD-
settled, which provides access to NDF market
Issued by HSBC and linked to various asset classes. This product usually high tailor-
made for investors ’
need for yield enhancement purpose
The product is delivered by HSBC and the return is based on the performance of a particular CNH1
bond. It also offers the flexibility of settling in USD and which is more favorable for overseas market interested in CNY products. The product can be done on funded or unfunded basis
Investment Currency Denominated in RMB (or CNH1)
Denominated in RMB (or CNH1)
Denominated in RMB but settled in USD, according to PBoC fixing
Denominated in RMB (or CNH1)Denominated in other currency (with a return linked to CNH1)
Denominated in USD
Issuer’s Incentive Favorable funding cost against onshore market or other funding channels
Favorable funding cost and broaden from retail funding channel to wholesale market. The relatively simple documentation is also an incentive when issuing CDs
Favorable funding alternative, as a hedge against their onshore RMB exposure
Favorable funding costPromote broad and flexible range of investment choices for RMB
Not Applicable
Investors’
Incentive Yield enhancement from credit and expectation on offshore deliverable CNH1
currency appreciation
Yield enhancement from credit and expectation on Offshore Deliverable CNH1
currency appreciation
Yield enhancement from credit and expectation on Offshore Non-deliverable CNY currency appreciation. Suitable to investors who do not currently hold RMB
Yield enhancement from credit and expectation on Offshore Deliverable CNH1
currency appreciation, as well as to various asset classes
Offer in a package combining returns on Credit, FX and Interest Rate
41
HSBC’s RMB experience
1st
foreign bank to settle cross-border RMB Trade in Hong Kong
1st
foreign bank to settle cross-border RMB Trade in all ASEAN countries
with HSBC presence
1st
foreign bank to settle cross-border RMB Trade in all six continents
1st
foreign bank to offer RMB current account and cheque services
in Hong Kong
1st
foreign bank granted RMB corresponding banking license
in China
1st
to lead-manage RMB Certificate of Deposits
in Hong Kong
1st
to execute RMB Interest Rate Swap
in Hong Kong
1st
to launch RMB Structured Deposit
in Hong Kong
1st
and Only
foreign bank to provide interbank RMB bond clearing / custody services
in China
1st
and Only
foreign bank as market maker of RMB-Ringgit
direct quotation in China
No.1
Bond House for Offshore RMB and HKD issuances
1st
to launch Offshore RMB Bond from an Emerging Market Issuer
1st
to launch Offshore RMB Bond from a High-yield Issuer
1st to launch International RMB Bond in London
42
HSBC made a clean sweep of all the major Asian regional Debt House awards for 2011,
across both G3 and local currency bonds
HSBC – Award-Winning #1 Bond House in Asia
Best Bookrunner
of Asia Pacific Bonds
Best Bookrunner
of G3 Bonds
2011
Bond House of the Year
Domestic Bond House of the Year
Dim Sum Bond House of the Year
2011
Best International Bond House
Best Local Currency Bond House
Best Sovereign Bond House
Best Offshore RMB Bond House2011
Best Debt Arranger
Best Loans Arranger
2011
Best Debt House in Asia
2011
Best Debt House
Best Bond House
Best Dim Sum Bond House
Best Loan House
2011
“HSBC’s G3 tally was a record, both in terms of volume and of issues… All told, the bank’s consistent performance across every cross-section of Asia’s international bond markets represented as close to complete market domination as anyone is ever likely
to get”IFRAsia
“HSBC took a near clean sweep of the awards this year thanks to its unprecedented dominance in both the G3 and local currency markets...”
FinanceAsia
“HSBC was clearly the best performer in Asia ex-Japan in terms of volumes and deals completed...the sheer depth and diversity of the deals HSBC played a role in, far outweighs its competitors in the space”
Asiamoney
“HSBC’s debt franchise cuts across G3, local currency, loans and securitisation
to become once more the go-to bank for debt deals ...... it reached out to Asian issuers across the region arranging some of the year’s landmark deals”
The Asset
43
CNH Bond League Table (2012YTD) HSBC executed ground-breaking transactions
Source: Bloomberg as of 7
May
2012
CNH Bonds
Bank CNYm Issues %
1 HSBC 17,553 54 29.1
2 Standard Chartered 7,464 28 12.4
3 Bank of China 6,743 8 11.2
4 Barclays 5,411 17 9.0
5 RBS 4,191 14 6.9
6 BNP Paribas 3,367 10 5.6
7 Deutsche Bank 3,299 13 5.5
8 ANZ 2,370 15 3.9
9 UBS 2,166 6 3.6
10 Citi 1,323 6 2.2
Total 60,381 165
March 2012
Ford Motor Company
RMB1bn Fixed Rate Notes due 2015
Joint Lead Manager and Bookrunner
March 2012
Ford Motor Company
RMB1bn Fixed Rate Notes due 2015
Joint Lead Manager and Bookrunner
March 2012
Alstom
RMB500m Fixed Rate Notes due 2015
Sole Lead Manager and Bookrunner
March 2012
Alstom
RMB500m Fixed Rate Notes due 2015
Sole Lead Manager and Bookrunner
February 2012
Mitsui & Co., Ltd.
RMB500m Fixed Rate Notes due 2017
Sole Lead Manager and Bookrunner
February 2012
Mitsui & Co., Ltd.
RMB500m Fixed Rate Notes due 2017
Sole Lead Manager and Bookrunner
March 2012
Emirates NBD
RMB750m Fixed Rate Notes due 2015
Joint Lead Manager and Bookrunner
March 2012
Emirates NBD
RMB750m Fixed Rate Notes due 2015
Joint Lead Manager and Bookrunner
February 2012
Lotte
Shopping
RM750mn due 2015Fixed Rates Notes
Joint Lead Manager and Bookrunner
February 2012
Lotte
Shopping
RM750mn due 2015Fixed Rates Notes
Joint Lead Manager and Bookrunner
November 2011
Baosteel
Group Corporation
RM1bn due 2013RMB2.1bn due 2014RMB500mn due 2016
Fixed Rates Notes
Joint Global Coordinator, Sole Rating Advisor, Joint Lead Manager and Bookrunner
November 2011
Baosteel
Group CorporationRM1bn due 2013RMB2.1bn due 2014RMB500mn due 2016
Fixed Rates NotesJoint Global Coordinator, Sole Rating Advisor, Joint Lead Manager and Bookrunner
September 2011
BSH Bosch & SiemensRMB850mn due 2014
RMB750mn due 2016 RMB400mn due 2018
Fixed Rates Notes
Joint Lead Manager and Bookrunner
September 2011
BSH Bosch & SiemensRMB850mn due 2014
RMB750mn due 2016 RMB400mn due 2018
Fixed Rates NotesJoint Lead Manager and Bookrunner
February 2012
America Movil
RM1bn due 2015Fixed Rates Notes
Sole Lead Manager and Bookrunner
February 2012
America Movil
RM1bn due 2015Fixed Rates Notes
Sole Lead Manager and Bookrunner
September 2011
Air Liquide
FinanceRMB1.75bnFixed Rate Notes due 2016RMB850mnFixed Rate Notes due 2018Joint Lead Manager and Bookrunner
September 2011
Air Liquide
FinanceRMB1.75bnFixed Rate Notes due 2016RMB850mnFixed Rate Notes due 2018Joint Lead Manager and Bookrunner
August 2011
Tesco PLC
RMB725mnFixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
August 2011
Tesco PLC
RMB725mnFixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
June 2011
Fonterra Co-operative Group Limited
RMB300mn Fixed Rate Notes due 2014
Sole Lead Manager and Bookrunner
June 2011
Fonterra Co-operative Group LimitedRMB300mn Fixed Rate Notes due 2014
Sole Lead Manager and Bookrunner
September 2011
BP Capital Markets PLC
RMB700mnFixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
September 2011
BP Capital Markets PLC
RMB700mnFixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
May 2011
Volkswagen
RMB1.5bnFixed Rate Notes due 2016
Joint Lead Manager and Bookrunner
May 2011
Volkswagen
RMB1.5bnFixed Rate Notes due 2016
Joint Lead Manager and Bookrunner
January 2011
International Finance Corporation
RMB150m Fixed Rate Notes due 2016
Sole Lead Manager and Bookrunner
January 2011
International Finance CorporationRMB150m Fixed Rate Notes due 2016
Sole Lead Manager and Bookrunner
January 2011
World Bank
RMB300m Fixed Rate Notes due 2013
Sole Lead Manager and Bookrunner
January 2011
World Bank
RMB300m Fixed Rate Notes due 2013
Sole Lead Manager and Bookrunner
March 2011
Unilever N.V.
RMB300m Fixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
March 2011
Unilever N.V.
RMB300m Fixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
HSBC – Undisputed Leader in the Dim Sum Bond Market
44
Of the 20 Multinational Corporations (“MNCs”)
which have accessed the Dim Sum bond market since 2011, HSBC was
Bookrunner on transactions from 18 issuers
HSBC’s unrivalled knowledge on the
repatriation of funds onshore and our universal distribution platform mean issuers can rely on a “safe pair of hands”
during their maiden CNH bond issue
HSBC MNC Credentials
March 2012
Raiffeisen
Bank International
RMB750mn Fixed Rate Notes due 2014Joint Lead Manager and Bookrunner
March 2012
Raiffeisen
Bank International
RMB750mn Fixed Rate Notes due 2014Joint Lead Manager and Bookrunner
February 2012
Mitsui & Co., Ltd.
RMB500m Fixed Rate Notes due 2017
Sole Lead Manager and Bookrunner
February 2012
Mitsui & Co., Ltd.
RMB500m Fixed Rate Notes due 2017
Sole Lead Manager and Bookrunner
September 2011
BSH Bosch & SiemensRMB850mn due 2014
RMB750mn due 2016 RMB400mn due 2018
Fixed Rates Notes
Joint Lead Manager and Bookrunner
September 2011
BSH Bosch & SiemensRMB850mn due 2014
RMB750mn due 2016 RMB400mn due 2018
Fixed Rates NotesJoint Lead Manager and Bookrunner
June 2011
Fonterra Co-operative Group Limited
RMB300mn Fixed Rate Notes due 2014
Sole Lead Manager and Bookrunner
June 2011
Fonterra Co-operative Group LimitedRMB300mn Fixed Rate Notes due 2014
Sole Lead Manager and Bookrunner
March 2012
Hitachi Capital Corporation
RMB500mn Fixed Rate Notes due 2015Sole Lead Manager and Bookrunner
March 2012
Hitachi Capital Corporation
RMB500mn Fixed Rate Notes due 2015Sole Lead Manager and Bookrunner
February 2012
Lotte
Shopping
RM750mn due 2015Fixed Rates Notes
Joint Lead Manager and Bookrunner
February 2012
Lotte
Shopping
RM750mn due 2015Fixed Rates Notes
Joint Lead Manager and Bookrunner
September 2011
Yum! Brands, Inc
RMB350mn Fixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
September 2011
Yum! Brands, Inc
RMB350mn Fixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
May 2011
Volkswagen
RMB1.5bnFixed Rate Notes due 2016
Joint Lead Manager and Bookrunner
May 2011
Volkswagen
RMB1.5bnFixed Rate Notes due 2016
Joint Lead Manager and Bookrunner
March 2012
Ford Motor Company
RMB1bn Fixed Rate Notes due 2015
Joint Lead Manager and Bookrunner
March 2012
Ford Motor Company
RMB1bn Fixed Rate Notes due 2015
Joint Lead Manager and Bookrunner
February 2012
America Movil
RM1bn due 2015Fixed Rates Notes
Sole Lead Manager and Bookrunner
February 2012
America Movil
RM1bn due 2015Fixed Rates Notes
Sole Lead Manager and Bookrunner
September 2011
Air Liquide
FinanceRMB1.75bnFixed Rate Notes due 2016
RMB850mn
Fixed Rate Notes due 2018Joint Lead Manager and Bookrunner
September 2011
Air Liquide
FinanceRMB1.75bnFixed Rate Notes due 2016
RMB850mnFixed Rate Notes due 2018Joint Lead Manager and Bookrunner
March 2011
Unilever N.V.
RMB300m Fixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
March 2011
Unilever N.V.
RMB300m Fixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
March 2012
Emirates NBD
RMB750m Fixed Rate Notes due 2015
Joint Lead Manager and Bookrunner
March 2012
Emirates NBD
RMB750m Fixed Rate Notes due 2015
Joint Lead Manager and Bookrunner
November 2011
IDBI Bank Limited
RMB650mn due 2014Fixed Rates Notes
Sole Lead Manager and Bookrunner
November 2011
IDBI Bank Limited
RMB650mn due 2014Fixed Rates Notes
Sole Lead Manager and Bookrunner
September 2011
BP Capital Markets PLC
RMB700mnFixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
September 2011
BP Capital Markets PLC
RMB700mnFixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
August 2011
Tesco PLC
RMB725mnFixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
August 2011
Tesco PLC
RMB725mnFixed Rate Notes due 2014
Joint Lead Manager and Bookrunner
March 2012
Alstom
RMB500m Fixed Rate Notes due 2015
Sole Lead Manager and Bookrunner
March 2012
Alstom
RMB500m Fixed Rate Notes due 2015
Sole Lead Manager and Bookrunner
November 2011
Lafarge Shui
On Cement
RMB1.5bn due 2014Fixed Rates Notes
Joint Lead Manager and Bookrunner
November 2011
Lafarge Shui
On Cement
RMB1.5bn due 2014Fixed Rates Notes
Joint Lead Manager and Bookrunner
Many firsts for HSBC
45
HSBC continued to re-define the Dim Sum Bond market landscape by executing ground-breaking transactions
First Dim Sum Bond from an emerging market issuer
First Dim Sum Bond issue in 2011 and from the World Bank
First PRC Property Developer and first H-share company to tap the Dim Sum Market
First Dim Sum Bond by a European corporate
First Dim Sum Bond from a public wind energy issuer
First Dim Sum Bond from a Hong Kong blue chip corporate
First Dim Sum Bond from a German corporate and first international Auto Dim Sum Bond
First Dim Sum Bond issued by an insurance company
First Dim Sum Bond issued from
an Australasian corporate
First Dim Sum Bond issued from an International Retailer
Largest Dim Sum Bond by a Western Corporate and largest 7 year offshore RMB Bond ever
First Triple Tranche Deal Priced in a single day
First Dim Sum Bond by a PRC Incorporated Corporate Issuer
First Dim Sum Bond by a Latin American Issuer and in Sec Registered Format
First Dim Sum Bond Issuance From Mena Region
First International RMB Bond
VTB BankRMB1bn Fixed Rate notes due 2013
World BankRMB500m Fixed Rate notes due 2013
Beijing Capital LandRMB1.15bn Fixed Rate notes due 2014
UnileverRMB300m Fixed Rate notes due 2014
China WindPowerRMB750m Fixed Rate notes due 2014
TowngasRMB1bn Fixed Rate notes due 2016
VolkswagenRMB1.5bn Fixed Rate notes due 2016
China Ping An Insurance Overseas (Holdings) Limited RMB2bn Fixed Rate notes due 2014
Fonterra Co-Operative GroupRMB600m Fixed Rate notes due 2014
Tesco plc
RMB725m Fixed Rate notes due 2014
Air Liquide
Finance
RMB1.75bn Fixed Rate notes due 2016,
RMB850m Fixed Rate notes due 2018
BSH Bosch & Siemens RMB2bn triple tranche Fixed Rate Note
Baosteel
Group CorporationRMB3.6bn triple tranche Fixed Rate Note
America MovilRMB1bn Fixed Rate Note
Emirates NBDRMB750m Fixed Rate Note
HSBC Bank plcRMB2bn Fixed Rate Note
Dec
2010
Jan
2011
Feb 2011
Mar 2011
Mar 2011
Mar 2011
May2011
May2011
Jun 2011
Aug 2011
Sep 2011
Sep 2011
Nov
2011
Feb
2012
Mar
2012
Apr
2012
Groundbreaking Dim Sum Bond Transactions
46
Disclaimer
Renminbi (RMB) is currently not freely convertible and conversion of RMB through banks in Hong Kong is subject to certain restrictions. Clients should be reminded of conversion risk in RMB products. In addition, there is a liquidity risk associated with RMB products, especially if such investments do not have an active secondary market and their prices have large bid/offer spreads. RMB products in Hong Kong are denominated and settled in RMB deliverable in Hong Kong, which represents a
market which is different from that from that of RMB deliverable
in Mainland China. For individual clients, conversion of RMB is
subject to daily limit in Hong Kong, the clients may have to allow time for conversion of RMB from/to
another currency of an amount exceeding the daily limit.
This document is issued by The Hongkong and Shanghai Banking Corporation Limited (HSBC). The information contained herein is derived from sources we believe to be reliable, but which we have not independently verified. HSBC makes no representation or warranty (express or implied) of any nature nor is any responsibility of any kind accepted with respect to the completeness or accuracy of any information, projection, representation or warranty (expressed or implied) in, or omission
from, this document. No liability is accepted whatsoever for any
direct, indirect or consequential loss arising from the use of this document. Any examples given are for the purposes of illustration only. The opinions in this document constitute our present judgement, which is subject to change without notice. This document does
not constitute an offer or solicitation for, or advice that you should enter into, the purchase or sale of any security, commodity or other investment product or investment agreement, or any other contract, agreement or structure whatsoever and is intended for institutional customers and is not intended for the use of private customers. The document is intended to be distributed in its entirety. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. Unless governing law permits otherwise, you must contact a HSBC Group member in your home jurisdiction if you wish to use
HSBC Group services in effecting a transaction in any investment
mentioned in this document. This document, which is not for public circulation, must not be copied, transferred or the content disclosed, to any third party and is not intended for use by any person other than the intended recipient or the intended recipient's
professional advisers for the purposes of advising the intended recipient hereon.
Copyright. The Hongkong and Shanghai Banking Corporation Limited
2006. ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of
The Hongkong and Shanghai Banking Corporation Limited.