* BoC Taipei yuan clearing rate 6.2280/6.2340 per dlr in
* Spot yuan trade in Taiwan nears that of Hong Kong
* Taiwan bank stocks rally
(Adds bank comments; updates throughout)
By Faith Hung
TAIPEI, Feb 6 China's yuan traded in Taiwan for
the first time on Wednesday, a further step in Beijing's march
to boost the currency's global reach and promote deeper economic
integration with its one-time political foe.
Taiwan, which counts China as its largest export market, is
a latecomer in developing offshore yuan business as trade has
been expanding in Hong Kong and London.
The much-anticipated trading of the Chinese currency in
Taiwan comes as the island seeks to play a key role in the
internationalisation of the yuan, also known as the renminbi
(RMB), as it moves toward becoming fully convertible.
The world's second-largest economy aims to raise the profile
of its currency in global trade and finance and rival foreign
exchange centres are expected to jostle for market share.
Analysts said Taiwan has natural demand for the yuan and has
potential to accumulate funds quickly.
"We see promising prospects for the RMB business in Taiwan,
given Taiwan's trade surplus with China (a source of RMB) and
Taiwan's outward FDI (foreign direct investment) to China, among
other cross-strait flows," said Frances Cheung, a senior
strategist of Credit Agricole CIB, in a research report.
Daily trade volume of offshore yuan, which is traded outside
of mainland China, was around $2 billion but recently spiked to
$3-3.5 billion this year, according to trade estimates.
The yuan was quoted at 6.2145/6.2155 to the U.S.
dollar in Taiwan, in line with the rate in Hong Kong at
6.2152/6.2170. Onshore spot yuan stood at 6.2317 by
"I'm very busy now as many clients are buying renminbi in
the market. The trading is quite active in the morning since it
is the first day," said a trader at a Taiwan bank.
Another trader said prices in Taiwan matched those in Hong
Kong. "The price so far is similar to Hong Kong's, but I'm not
sure how it will perform going forward," the trader said.
The yuan clearing rate offered by Bank of China
Taipei branch opened at 6.2265/6.2325 to the U.S.
dollar on its first trading day in Taiwan, similar to what was
offered by Bank of China Hong Kong.
BANKING STOCKS RALLY
Expectations of explosive growth for RMB-related investment
products helped Taiwan's financial shares surge about 4
percent so far this week, sharply outperforming the broader
market's 0.7 percent gain.
"The business is the only kind that every bank will be
efforting to grab as much of as possible," said Andrew Lee,
chief financial officer of EnTie Bank, which is
majority owned by global private equity investor Longreach.
"However, we'll not see real contribution to profits until
six - 12 months later, pending on how banks can persuade their
clients to convert deposits into the yuan-denominated deposits
and wealth management products," Lee said.
Taiwan is also developing its offshore yuan bond market,
with BNP Paribas and Deutsche Bank among
financial firms likely to issue the first yuan bond in Taiwan.
Media reports said on Tuesday that Taiwan Financial
Supervisory Commission had granted approval to China Trust
Commercial Bank to issue a yuan-denominated bond in Taiwan.
Taiwan's central bank said on Tuesday it would allow the
island's banks to start conducting yuan currency business on the
island from Wednesday.
Previously, only offshore banking units of Taiwan banks
could take yuan deposits from overseas individuals and
companies, suggesting a vast potential to expand the pool once
local residents can do so.
Taiwan and China have been moving to bolster their ties in
the financial sector, which have lagged the closer cooperation
in manufacturing and other areas due to Taiwanese concerns over
influence by China.
Bank of China's Taipei branch also said it was
offering an interest rate of 0.648 percent for yuan deposits in
current accounts. That was slightly higher than the 0.629
percent it offered in Hong Kong.
Statistics from the City of London last April showed that
London's spot yuan trading represented 26 percent of the global
offshore yuan spot market, following Hong Kong's 56 percent.
(Additional reporting by Lin Miao-jung in TAIPEI and Michelle
Chen in HONG KONG; Editing by Jacqueline Wong)