RMB: Going Global

RMB: Going Global
Prepared by: RMB Business Development, Asia-Pacific,
HSBC Global Markets
Date: May 2012
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
2
RMB Internationalisation
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
Nominal GDP (USDbn)2
Exports (USDbn)3
16,000
2500
14,000
2000
12,000
10,000
1500
8,000
1000
6,000
4,000
500
2,000
0
0
1995
1997
1999
US
2001
2003
China
2005
2007
Japan
2009
2009
2011
EU
EUA 17
Daily Average Turnover (USDbn)3
USD
3,500
3,000
$
3,000
2,500
2,500
500
2011
Japan
UK
USD
$
2,000
EUR
1,500
1,000
US
Daily Average Turnover (USDbn)3
3,500
2,000
2010
China
€
JPY
RMB
¥
¥
0
GBP
£
1,500
EUR
1,000
€
500
RMB
JPY
¥
¥
GBP
£
0
2010 Bank for International Settlement (BIS) Data
2010 BIS Data (if RMB fully convertible)
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%
4
RMB Internationalisation: A three-stage process
1



A Top Global
Trading Currency
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
2








A Top Global
Investment Currency
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 2011
Mainland 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 2011
RMB 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 2012
Formalisation of RMB bond issuance in Hong Kong by
Mainland non-financial firms
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
5
A Top Global
Reserve Currency
3


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
RMB Internationalisation – Timeline unfolding rapidly
HSBC economics forecast
2003–2008
2009
2010
 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
2011
 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)
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
6
2012
 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)
2013–2015
 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
2020
 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
RMB Trade Settlement
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 validation
Source: 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
8
How does the scheme work
 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
(1) CNH is the name used in the market to refer to offshore deliverable RMB
9
Implications for offshore corporate
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 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 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 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, RMBdenominated funds, RMB equities products and
exchange-traded funds
10
Development of Offshore RMB
Chronology of events relating to RMB liberalisation
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 endJune. 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
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
12
Offshore RMB – Experience in Hong Kong







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
250
700
600
200
500
400
150
300
100
200
50
Time Deposit (LHS)
Demand and Savings Deposit (LHS)
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-rmbbooklet.pdf?bcsi_scan_A61131364D8D33B1=MDtChdMp5RqXsn2YFP+Tjaj3qAs1AAAA65h8xQ==&bcsi_scan_filename=hkma-rmb-booklet.pdf
13
RMB Trade Settlement (RHS)
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
Feb-10
Jan-10
Dec-09
Nov-09
Oct-09
Sep-09
Aug-09
0
Jul-09
100
0
Onshore/offshore connectivity and convergence
OFFSHORE
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 2012
3. 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
ONSHORE
Mainland
China
(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
14
1. RMB Outward Direct Investment
 Announced in Jan 11 by PBoC
 RMB2.9bn in 1Q 2012
2. 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
RMB in the World
London
• Formal backing from China to become an offshore RMB trading
centre
• UK Treasury and HKMA announced the launch of a joint privatesector 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
Iceland
Belarus
Russia
Kazakhstan
Turkey
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
Uzbekistan
Mongolia
China
Pakistan
UAE
South Korea
Hong Kong
Thailand
Singapore
Malaysia
Indonesia
Australia
Argentina
New Zealand
Countries / regions with currency
swap agreements with China
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 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
15
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: Edging
up temporarily, 9 April 2012”, “Asian FX : RMB - faster liberalisation, 5 April 2012”
16
Offshore RMB Markets
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
18
RMB FX and Money Market
FX spot
Market turnover increased
gradually to around
USD1.4bn daily
6.76
Recent RMB band widening
helps to a lower CNYCNH divergence2
6.66
6.61
6.56
6.51
6.46
6.41
6.36
6.31
Offshore
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
20
Onshore
25-Apr
28-Mar
29-Feb
01-Feb
04-Jan
07-Dec
09-Nov
12-Oct
14-Sep
17-Aug
20-Jul
22-Jun
25-May
27-Apr
30-Mar
02-Mar
02-Feb
05-Jan
08-Dec
10-Nov
6.26
13-Oct
CNY-CNH divergence under
such circumstances
may be more limited
22 September 2011: CNH1 was
traded at a discount as much as
2.5% due to USDCNH1 shortcovering on risk aversion
15-Sep
During periods of risk off
and particular USD
demand, onshore
USDCNY has more
flexibility to move
upwards
6.71
21-Jul
Widening of the USDCNY
daily trading band
allowed more flexibility
with increased volatility
Mid-October 2010: CNH1 was traded
at a premium as much as 3% at one
point due to speculation of RMB
reveluation
6.81
18-Aug
Offshore market is often
being referred as CNH1
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
6.40
6.38
6.36
6.34
6.32
6.30
SPOT
1M
2M
3M
6M
DF
Data as of 10 May 2012
Note:
(1) CNH is the name used in the market to refer to offshore deliverable RMB
Source: HSBC, Reuters
21
NDF
9M
Offshore DF
12M
Summary of the forward curves
Onshore
Deliverable Market
Offshore Nondeliverable 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 RMB
Data as of 10 May 2012, spot CNY at 6.3123, spot CNH at 6.315
22
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
23
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
Onshore RMB
(CNO)
Offshore NDF
(CNY)
Offshore Deliverable
(CNH)
Standard spot ticket
USD5–10m
N/A
USD1–2m
Spot daily turnover
USD20–30bn
N/A
USD50m
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
Standard spot ticket
USD5–10m
N/A
USD10m
Spot daily turnover
USD20–30bn
N/A
USD1.1bn
0.0005–0.0010
N/A
0.0010
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
Physical delivery
Fixing off SAEC
Physical delivery
Date
Bid / Offer
August
2010
Bid / Offer
FX Options?
May
2012
Fixing Mechanism
24
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
Deliverable RMB Products
Non-deliverable RMB Products
FX Product
Components
 Spot FX (for trade as well as for general purposes)  Non-deliverable Forward
 Deliverable Forward (for general purpose)
 Non-deliverable Option
 Deliverable Option (for general purpose)
Product
Capabilities
 Vanilla, European and discrete barriers, callable
variations, target redemption variations and any
structured forwards offered by HSBC
 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
 Baskets
 Vanilla and Barrier options on other currencies
quanta to CNY (e.g. AUD/USD DNT quanta to
CNY)
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)
*Availability varies based on transacting HSBC entity
(1) CNH is the name used in the market to refer to offshore deliverable RMB
25
 FX Indices
Offshore RMB Bond Market (Dim Sum bonds)
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
27
RMB bond market dynamics – Summary
Offshore RMB Market (in Hong Kong and London)
Current & Eligible
Issuers
 Any offshore financial institutions or corporates
 Approved Mainland China financial institutions (“FIs”) and corporates
Market size




Investor Base
Use of Proceeds
Recent Developments
Recent Issues
(examples)
Onshore RMB Market (in PRC)
Gross issuance for 2011 is RMB189.3bn
YTD gross issuance: RMB103bn
Retail investors
Fund managers, banks, private banks, insurance companies and corporates
 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)
 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-versuspayment 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
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)
Source: HSBC
(1) CNH is the name used in the market to refer to offshore deliverable RMB
28
 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 approval
 Total issuance size is over RMB50 trillion since 2005
 Over RMB6tn new issuance in 2011 Jan-Dec
 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
 RQFIIs
 Proceeds kept in Mainland China
 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.
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
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 RMB260310bn gross issuance
and RMB400-450bn
market size by the end
of 2012
2007-2012 RMB Bonds/CD Issuance, by country New issuances by Issuer Typre (2011)1
Issuance Size (RMBbn)
300
Sovereigns (11%)
250
200
Supranationals (0%)
150
Chinese Fis (42%)
100
Corporates (32%)
50
Foreigns Fis (5%)
MNC (10%)
0
2007
2008
2009
2010
2011
2012
Announcement Date
Mainland China
Hong Kong
Non-Chinese Entity
Expected
New issuances by Tenor (2012 YTD)1
In terms of issuer type,
HSBC believes Chinese
entities, including
sovereigns, banks, and
corporates, will continue
to dominate issuance in
this space
New issuances by Issuer Typre (2012 YTD)1
Less than 1-year (33%)
Sovereigns (0%)
1-year (33%)
Supranationals (0%)
2-year (10%)
Chinese Fis (76%)
3-year (19%)
Corporates (4%)
5-year (2%)
Foreigns Fis (9%)
More than 10-year (3%)
MNC (11%)
(1) Excluding synthetic RMB bond issuances
29
Issuer’s considerations
Key considerations for
issuers looking to tap
the international RMB
bond market
Issuer qualification


Use of proceeds


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
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
(1) CNH is the name used in the market to refer to offshore deliverable RMB
30
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 RMBdenominated and settled bonds and certificates of
deposit issued outside of the PRC
 The index accounts for slightly over 10% of the ALBIChina 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)
Included in HSBC CNH index (51%)
Retail bonds (3%)
Floaters (exclude Retail) (1%)
Other (45%)
(1) CNH is the name used in the market to refer to offshore deliverable RMB
As of May 2012
Source: HSBC
31
CNH1 Index results
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
Total return of CNH1 bonds in USD and RMB terms
105
103
Avg Coupon (%)
HCNHAC
2.63
101
99
Coupon
Capital loss
97
3.39
95
Return since inception
Total return in USD
4.71%
Total return in RMB
0.28%
Return from FX
4.43%
Return from capital gain
Return from coupon
FX
Jan-11
Apr-11
TR (UDS)
-3.50%
3.79%
Source: HSBC, Data as of 10 May 2012
(1) CNH is the name used in the market to refer to offshore deliverable RMB
32
Jul-11
Oct-11
TR (RMB)
Jan-12
Apr-12
Capital Gain
RMB Interest Rate Derivatives Market
RMB interest rate derivatives market
Non-Deliverable Market –
NDS




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
Non-Deliverable Market –
ND Interest Rate Swap (NDIRS)




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
(1) CNH is the name used in the market to refer to offshore deliverable RMB
34
Deliverable CNH1 Market –
Interest Rate Swap (IRS)




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
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
2.30%
2.20%
2.10%
2.00%
1.90%
1.80%
1.70%
1.60%
1.50%
6M
9M
12M
18M
USDCNH CCS
Data as of 10 May 2012
Source: HSBC
(1) CNH is the name used in the market to refer to offshore deliverable RMB
35
24M
30M
36M
Offshore RMB Initial Public Offering (IPO)
Offshore RMB IPO
Introduction
HSBC – your partner of choice for RMB IPOs
 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
Lead bank who has pioneered the first RMB
IPO
Long standing track record of executing
RMB denominated products
Capabilities to provide a total solution to
both issuers and investors
Team of committed and highly experienced
senior industry professionals
37
HSBC RMB Capabilities and Credentials
HSBC’s RMB capability
Payments and Cash
Management
Custody
Exchange Services and
Risk Management
Products
Borrowing / Financing
Products
Investment Products
First CNH3 dual currency
investment offered to
retail investors in
Singapore
March 2011
Offshore RMB Products1
 No restriction on account opening
Onshore RMB Products (China)2
 No restriction on account opening


















RMB Custody and Funds Administration Services
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












Trade financing facilities and commercial loans
Issuance of offshore RMB bonds / certificate of deposits (CDs)
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
First FX index linked to
CNH3 traded with
European fund manager
March 2011
Acted as joint listing
agent for first offshore
RMB IPO Hui Xian REIT
First CNH3 Multicallable
Forward traded in the
market
April 2011
June 2011
RMB Custody and Clearing
Spot FX
Forward FX
FX swaps
Interest Rate Swap and Cross Currency Swap
Credit Risk Mitigation Agreement / Warrant
FX options
Trade financing facilities and commercial loans
Money Market
Time deposit
Call deposit
Structured deposit
Bonds
Non-financial bonds
First CNH3 Dual Currency
deposit traded in Japan
HSBC trades GBP CNH3
structured forward with
UK corporate client
July 2011
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
39
Aug 2011
HSBC trades CNH3 FX
option in Germany
Nov 2011
Fixed income product range
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 Kong
Currently there is a diverse
range of CNH1 issuers
including Chinese policy
banks, multi-nationals,
corporates and foreign banks
CNY-deliverable CD issued
RMB-denominated, USDin Hong Kong
settled, which provides
access to NDF market
Banks 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
Issued by HSBC and linked
to various asset classes. This
product usually high tailormade 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 cost
Promote 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
Source: HSBC
(1) CNH is the name used in the market to refer to offshore deliverable RMB
40
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
41
HSBC – Award-Winning #1 Bond House in Asia
HSBC made a clean sweep of all the major Asian regional Debt House awards for 2011,
across both G3 and local currency bonds
Best Bookrunner of
Asia Pacific Bonds
Bond House of the
Year
Best International
Bond House
Best Bookrunner of
G3 Bonds
Domestic Bond
House of the Year
Best Local Currency
Bond House
Dim Sum Bond
House of the Year
Best Sovereign
Bond House
Best Debt Arranger
Best Loans Arranger
Best Debt House in
Asia
Best Debt House
Best Bond House
Best Dim Sum Bond
House
Best Loan House
Best Offshore RMB
Bond House
2011
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
2011
2011
“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
2011
“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
42
2011
“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
HSBC – Undisputed Leader in the Dim Sum Bond Market
CNH Bond League Table (2012YTD)
HSBC executed ground-breaking transactions
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
1,323
6
2.2
60,381
165
10 Citi
Total
Source: Bloomberg as of 7 May 2012
March2012
2012
March
March2012
2012
March
March2012
2012
March
February2012
2012
February
FordMotor
MotorCompany
Company
Ford
EmiratesNBD
NBD
Emirates
Alstom
Alstom
Mitsui&&Co.,
Co.,Ltd.
Ltd.
Mitsui
RMB1bn
RMB1bn
FixedRate
RateNotes
Notesdue
due2015
2015
Fixed
RMB750m
RMB750m
FixedRate
RateNotes
Notesdue
due2015
2015
Fixed
RMB500m
RMB500m
FixedRate
RateNotes
Notesdue
due2015
2015
Fixed
RMB500m
RMB500m
FixedRate
RateNotes
Notesdue
due2017
2017
Fixed
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
February2012
2012
February
February2012
2012
February
November2011
2011
November
September2011
2011
September
LotteShopping
Shopping
Lotte
AmericaMovil
Movil
America
RM750mndue
due2015
2015
RM750mn
FixedRates
RatesNotes
Notes
Fixed
RM1bndue
due2015
2015
RM1bn
FixedRates
RatesNotes
Notes
Fixed
BaosteelGroup
Group
Baosteel
Corporation
Corporation
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
RM1bn due 2013
RM1bn due 2013
RMB2.1bn due 2014
RMB2.1bn due 2014
RMB500mn due 2016
RMB500mn
2016
Fixed Ratesdue
Notes
Fixed Rates Notes
Joint Global Coordinator, Sole
Joint
Global
Coordinator,
Sole
Rating
Advisor,
Joint Lead
Manager
Rating
Advisor, Joint Lead Manager
and Bookrunner
and Bookrunner
BSHBosch
Bosch&&Siemens
Siemens
BSH
RMB850mndue
due2014
2014
RMB850mn
RMB750mndue
due2016
2016
RMB750mn
RMB400mn
due
2018
RMB400mn due 2018
Fixed
Rates
Notes
Fixed Rates Notes
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
September2011
2011
September
September2011
2011
September
August2011
2011
August
June2011
2011
June
AirLiquide
LiquideFinance
Finance
Air
RMB1.75bn
RMB1.75bn
Fixed
Rate
Notes
due2016
2016
Fixed Rate Notes due
RMB850mn
RMB850mn
FixedRate
RateNotes
Notesdue
due2018
2018
Fixed
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
BPCapital
CapitalMarkets
MarketsPLC
PLC
BP
TescoPLC
PLC
Tesco
RMB700mn
RMB700mn
FixedRate
RateNotes
Notesdue
due2014
2014
Fixed
RMB725mn
RMB725mn
FixedRate
RateNotes
Notesdue
due2014
2014
Fixed
FonterraCo-operative
Co-operative
Fonterra
GroupLimited
Limited
Group
RMB300mn
RMB300mn
FixedRate
RateNotes
Notesdue
due2014
2014
Fixed
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
May2011
2011
May
March2011
2011
March
January2011
2011
January
January2011
2011
January
Volkswagen
Volkswagen
UnileverN.V.
N.V.
Unilever
WorldBank
Bank
World
RMB1.5bn
RMB1.5bn
FixedRate
RateNotes
Notesdue
due2016
2016
Fixed
RMB300m
RMB300m
FixedRate
RateNotes
Notesdue
due2014
2014
Fixed
InternationalFinance
Finance
International
Corporation
Corporation
RMB150m
RMB150m
FixedRate
RateNotes
Notesdue
due2016
2016
Fixed
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
43
RMB300m
RMB300m
FixedRate
RateNotes
Notesdue
due2013
2013
Fixed
Many firsts for HSBC
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
March2012
2012
March
March2012
2012
March
March2012
2012
March
March2012
2012
March
March2012
2012
March
RaiffeisenBank
Bank
Raiffeisen
International
International
HitachiCapital
Capital
Hitachi
Corporation
Corporation
FordMotor
MotorCompany
Company
Ford
EmiratesNBD
NBD
Emirates
Alstom
Alstom
RMB750mn
RMB750mn
FixedRate
RateNotes
Notesdue
due2014
2014
Fixed
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
RMB500mn
RMB500mn
FixedRate
RateNotes
Notesdue
due2015
2015
Fixed
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
RMB1bn
RMB1bn
FixedRate
RateNotes
Notesdue
due2015
2015
Fixed
RMB750m
RMB750m
FixedRate
RateNotes
Notesdue
due2015
2015
Fixed
RMB500m
RMB500m
FixedRate
RateNotes
Notesdue
due2015
2015
Fixed
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
February2012
2012
February
February2012
2012
February
February2012
2012
February
November2011
2011
November
November2011
2011
November
Mitsui&&Co.,
Co.,Ltd.
Ltd.
Mitsui
LotteShopping
Shopping
Lotte
AmericaMovil
Movil
America
IDBIBank
BankLimited
Limited
IDBI
LafargeShui
ShuiOn
OnCement
Cement
Lafarge
RMB500m
RMB500m
FixedRate
RateNotes
Notesdue
due2017
2017
Fixed
RM750mndue
due2015
2015
RM750mn
FixedRates
RatesNotes
Notes
Fixed
RM1bndue
due2015
2015
RM1bn
FixedRates
RatesNotes
Notes
Fixed
RMB650mndue
due2014
2014
RMB650mn
FixedRates
RatesNotes
Notes
Fixed
RMB1.5bndue
due2014
2014
RMB1.5bn
FixedRates
RatesNotes
Notes
Fixed
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
September2011
2011
September
September2011
2011
September
September2011
2011
September
September2011
2011
September
August2011
2011
August
BSHBosch
Bosch&&Siemens
Siemens
BSH
RMB850mndue
due2014
2014
RMB850mn
RMB750mn
due
2016
RMB750mn due 2016
RMB400mn due
due2018
2018
RMB400mn
FixedRates
RatesNotes
Notes
Fixed
Joint
Lead
Manager
and
Joint Lead Manager and
Bookrunner
Bookrunner
Yum!Brands,
Brands,Inc
Inc
Yum!
BPCapital
CapitalMarkets
MarketsPLC
PLC
BP
TescoPLC
PLC
Tesco
RMB700mn
RMB700mn
FixedRate
RateNotes
Notesdue
due2014
2014
Fixed
RMB725mn
RMB725mn
FixedRate
RateNotes
Notesdue
due2014
2014
Fixed
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
AirLiquide
LiquideFinance
Finance
Air
RMB1.75bn
RMB1.75bn
Fixed
Rate
Notes
due2016
2016
Fixed Rate Notes due
RMB850mn
RMB850mn
FixedRate
RateNotes
Notesdue
due2018
2018
Fixed
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
June2011
2011
June
May2011
2011
May
March2011
2011
March
FonterraCo-operative
Co-operative
Fonterra
GroupLimited
Limited
Group
RMB300mn
RMB300mn
FixedRate
RateNotes
Notesdue
due2014
2014
Fixed
Volkswagen
Volkswagen
UnileverN.V.
N.V.
Unilever
RMB1.5bn
RMB1.5bn
FixedRate
RateNotes
Notesdue
due2016
2016
Fixed
RMB300m
RMB300m
FixedRate
RateNotes
Notesdue
due2014
2014
Fixed
SoleLead
LeadManager
Managerand
and
Sole
Bookrunner
Bookrunner
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
JointLead
LeadManager
Managerand
and
Joint
Bookrunner
Bookrunner
RMB350mn
RMB350mn
FixedRate
RateNotes
Notesdue
due2014
2014
Fixed
44
Groundbreaking Dim Sum Bond Transactions
HSBC continued to re-define the Dim Sum Bond market landscape by executing ground-breaking transactions
First International RMB Bond
HSBC Bank plc
RMB2bn Fixed Rate Note
Apr 2012
First Dim Sum Bond Issuance From Mena Region
Emirates NBD
RMB750m Fixed Rate Note
Mar 2012
First Dim Sum Bond by a Latin American Issuer and in Sec Registered Format
America Movil
RMB1bn Fixed Rate Note
Feb 2012
First Dim Sum Bond by a PRC Incorporated Corporate Issuer
Baosteel Group Corporation
RMB3.6bn triple tranche Fixed Rate Note
Nov 2011
First Triple Tranche Deal Priced in a single day
BSH Bosch & Siemens
RMB2bn triple tranche Fixed Rate Note
Sep 2011
Air Liquide Finance
Largest Dim Sum Bond by a Western Corporate and largest 7 year offshore RMB Bond ever
RMB1.75bn Fixed Rate notes due 2016,
RMB850m Fixed Rate notes due 2018
Sep 2011
First Dim Sum Bond issued from an International Retailer
Tesco plc
RMB725m Fixed Rate notes due 2014
Aug 2011
First Dim Sum Bond issued from an Australasian corporate
Fonterra Co-Operative Group
RMB600m Fixed Rate notes due 2014
Jun 2011
First Dim Sum Bond issued by an insurance company
China Ping An Insurance Overseas (Holdings) Limited
RMB2bn Fixed Rate notes due 2014
May2011
First Dim Sum Bond from a German corporate and first international Auto Dim Sum Bond
Volkswagen
RMB1.5bn Fixed Rate notes due 2016
May2011
First Dim Sum Bond from a Hong Kong blue chip corporate
Towngas
RMB1bn Fixed Rate notes due 2016
Mar 2011
First Dim Sum Bond from a public wind energy issuer
China WindPower
RMB750m Fixed Rate notes due 2014
Mar 2011
First Dim Sum Bond by a European corporate
Unilever
RMB300m Fixed Rate notes due 2014
Mar 2011
First PRC Property Developer and first H-share company to tap the Dim Sum Market
Beijing Capital Land
RMB1.15bn Fixed Rate notes due 2014
Feb 2011
First Dim Sum Bond issue in 2011 and from the World Bank
World Bank
RMB500m Fixed Rate notes due 2013
Jan 2011
First Dim Sum Bond from an emerging market issuer
VTB Bank
RMB1bn Fixed Rate notes due 2013
Dec 2010
45
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.
46