Competition heats up in Malaysia-Singapore race for yuan bond issuance

Hong Kong remains sweat-free, ahead of the game.

Malaysia and Singapore’s governments, competing for a share of bond issuance in a globalizing Chinese yuan, are finding big-cat branding alone isn’t enough to challenge the dominance of Hong Kong, a report by Bloomberg says.

Cagamas Bhd. raised 1.5 billion yuan ($244 million) earlier this month in Malaysia’s inaugural offer of Tiger Emas bonds, the first issue in the Chinese currency to be cleared locally. The new securities join Lion City debentures in Singapore and Formosa bonds in Taiwan, which started last year and together comprise about 5 percent of a market that’s dominated by Hong Kong’s Dim Sum notes, Bloomberg data show.

Singapore’s position as a regional private banking hub, and Malaysia’s stronghold as an Islamic finance center will bring new investors into the offshore yuan bond market. Hong Kong’s advantage lies in its head start in opening up trade and investment in the currency. Yuan deposits in the city are approaching the 1 trillion yuan mark, versus some 254 billion yuan in Singapore as of June.

“Hong Kong is still the largest source of foreign direct investment for China and a very large portion of Chinese trade goes to Hong Kong,” Ma Jun, People’s Bank of China’s chief economist, said in an interview in Singapore on Sept. 22. “These are the fundamental factors that will remain to Hong Kong’s advantage but others have their own. For example, Singapore being closer to the Asean economy, which is a major trading partner to China.”

View the full report here.