Clearstream, the financial market infrastructure already active in Asia since 1990, this week reaches a key milestone for developing a direct settlement link to the Taiwanese market.
As part of its Asia strategy, Clearstream is working with the Taiwanese central securities depository, the Taiwanese Central Securities Depository (TDCC), to develop a direct settlement link for global investors and issuers to access the Taiwanese international bond market such as the Renminbi-denominated "Formosa bond".
By opening an account with the TDCC, Clearstream becomes the first international central securities depository (ICSD) foreign participant of this local CSD and kicks off the process for establishing a settlement link in this market. The settlement link, to be operated by Deutsche Bank AG, Taipei Branch and due for completion in the coming year, will offer settlement and custody services for the foreign currency denominated bonds including the "Formosa bond". This development follows new measures from the Taiwanese regulators which pave the way for foreign investors to be able to more readily invest in the Taiwanese market.
Since the launch of the offshore RMB programme in 2009 and China's recent measures aimed at internationalising its currency, there has been impressive appetite for this growing world currency. The Formosa bond in Taiwan is one way for investors to gain offshore access to it.
China is the second largest economy in the world with its currency presently standing in 8th place as a world payment currency by value, having risen from 20th place since 2012, according to SWIFT's statistics. Yet the RMB accounts for less than 9% of global trade finance volume. This compares to the USD, which accounts for more than 81%, so it is clear that there is a large gap between the currencies of the world's two largest economies, indicating clear global growth potential for markets like the Formosa bond market, as part of the Chinese offshore market.
According to the Central Bank of the Republic of China (Taiwan), the current RMB deposits in Taiwan, as of February 2014, is in the excess of RMB 247 billion for domestic investors. However, participation for foreign investors currently remains very limited given the market infrastructure does not yet exist to enable an increase in foreign investment - Clearstream's settlement link will help address this by offering a new direct channel for foreign investors to access the Formosa bond market.
Berthold Kracke, Head of Business Management, responsible for Network Management and Member of the Clearstream Executive Board, Clearstream, comments: "There is an ever growing appetite amongst international investors for investments in Asia, and the Taiwanese market can play an important role in this. Today, we are delighted to celebrate our first step in developing a direct settlement link to this important market - namely, a Clearstream account opening at the Taiwanese central securities depository, TDCC. This paves the way to deliver global access to the Taiwanese market as an important contribution to connecting Asian issuers with global investors. We look forward to working with TDCC to offer and facilitate optimal access to the Formosa bond market."
The Taiwanese Central Securities Depository (TDCC) comments: "In conjunction with the government's active promotion of unprecedented international business development opportunities, TDCC is committed to attract international central securities depositories to Taiwan and to connect with international investors. Clearstream's participation in TDCC will facilitate investments and settlement between international investors and the Taiwan international bonds market. TDCC will continue to improve standardisation and automation to achieve a more complete and diversified offering for international investors."
Clearstream has a long-standing presence in Asia: the company opened its first office in the region in Hong Kong in 1990. Clearstream also has representative offices in Dubai (since 1995) and Tokyo (since 2007) and a branch in Singapore (since 2009) - the company's operational hub for the region. Clearstream offers access to the following markets in Asia: China (B Shares), Hong Kong, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea and Thailand.