S’pore enhances role as top offshore renminbi centre

SINGAPORE — The Republic’s position as one of the major offshore renminbi (RMB) centres will receive another boost come next month as a new yuan futures contract, supported by the Bank of China (BOC), will start trading on the Singapore Exchange (SGX), amid a surge in global demand for trading and products denominated in the Chinese currency.

The RMB market here has grown strongly following the launch of RMB clearing arrangements in May last year, noted Senior Minister of State (Finance and Transport) Josephine Teo. RMB deposits in Singapore have increased from 138 billion yuan (S$28.4 billion) in June last year to 254 billion yuan (S$52.3 billion) a year later, statistics by the Monetary Authority of Singapore showed.

Over the same period, RMB-denominated loans including trade finance grew 88 per cent to surpass half a trillion yuan, while the average daily traded volume of RMB foreign exchange (FX) almost quadrupled on-year to close to US$70 billion.

“In April, the Society for Worldwide Interbank Financial Telecommunication reported that Singapore had become the largest offshore RMB clearing centre outside Greater China, in terms of yuan world payments value,” said Mrs Teo, who was speaking at the BOC-SGX RMB Internationalisation Forum yesterday.

“This corroborates with the strong growth that we are seeing in our RMB market and validates Singapore’s role as an international financial centre and regional trading hub.”

Trading of the new FX futures contract in yuan will start on Oct 20, along with that of the Japanese yen and Thai baht, SGX said. These additions will expand the exchange’s suite of FX futures that it first launched in November last year. Currently, there are six FX futures contracts here based on currencies such as the Singapore dollar, the Indian rupee and the South Korean won.

The BOC will be the pioneer market-marker for the RMB futures and the first Chinese settlement bank for the exchange’s derivatives market.

“The enhanced SGX Asian FX suite widens the window for even more investors to tap the growth opportunities across major Asian markets and manage their currency exposures at the same time,” said SGX’s chief executive Magnus Bocker.

“The SGX RMB futures complements the range of RMB-denominated investment products in Singapore and will further boost the growth and deployment of the RMB deposits pool in Singapore,” he added.

The introduction of the new futures contract comes as the Chinese yuan is fast emerging as one of the most common international trading currencies in the world. BOC’s Offshore RMB Index showed that RMB use in international financial markets rose 73.85 per cent on-year to a record high in the second quarter of this year. As the currency continues to gain traction, there is a need for institutions to manage the risk of currency fluctuations using products such as the SGX RMB futures.

Chief financial officer of CapitaLand Arthur Lang, who was one of the panellists at yesterday’s forum, welcomed the latest initiative. “For many foreign companies having businesses in China, including CapitaLand, some of the initiatives that we have today will perhaps allow us to raise funding offshore at a more competitive rate. They make sense from liquidity, risk management and management of FX volatility standpoints,” he said.