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Formosa Bonds Break Into the Mainstream

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Formosa Bonds Break Into the Mainstream Formosa Bond Roundtable Formosa bonds Sponsored by break into the Supporting organisation mainstream Taiwan's Formosa bond market has taken off in 2015, helped by regulatory changes and a favourable cross-currency swap. Issuers from all over the world have flocked to take advantage of keen investor interest in the asset class, with foreign financial institutions particularly active in bringing new renminbi- denominated deals. Carrie Hong, editor of GlobalRMB, a sister publication of Asiamoney, discusses the recent developments in the market and its future prospects with a group of key participants representing issuers, investors and intermediaries. PARTICIPANTS Sarah Chen, head of fixed income, treasury division, E.Sun Bank Richard Liu, vice president, bond department, Taipei Exchange (TPEx) Eddy Lui, regional head of global markets for Greater China, global banking, Maybank Carol Tao, assistant general manager of fixed income section, treasury department, Bank of Taiwan Yvonne Tsai, senior vice president, fixed income products division, Cathay Life Insurance David Wang, CFO, Far Eastern New Century Corporation (FENC) Moderator: Carrie Hong, editor, GlobalRMB Carrie Hong, GlobalRMB: Issuance of promote the issuance of international bonds introduce themselves as Taiwan Gretai- Formosa bonds and international bonds in in Taiwan. Last year it relaxed market listed ones, others didn't really understand Taiwan has attracted a lot of attention from regulations. This year it changed its English that they were actually listed on an bond market participants around the world. name from the GreTai Securities Market to exchange market. We therefore changed So far this year, according to our estimate, Taipei Exchange. What was the reason for the English name to give people a very 27 RMB bonds have been issued in Taiwan this change? clear idea of what we are. with a total volume of Rmb17bn ($2.7bn), The reason for choosing Taipei which almost equals the whole year's Richard Liu, TPEx: The English name was was because most of our peers derive issuance in 2014. The dim sum bond market changed to Taipei Exchange because our their names either from the name of is weakening and many investors in Mainland previous English title of GreTai Securities their country or of their city. To avoid China are beginning to show interest in the Market could be quite confusing to foreign confusion with the Taiwan Stock Exchange Formosa bond market. investors. When international institutions Corporation, we chose to rename the Let's start our discussion with Taipei invited their clients to list in Taiwan, their company as Taipei Exchange. Exchange. Over the past two years, the clients would be confused by our English As our trading activities are not limited exchange has been working very hard to name. Besides, when some companies to securities only, we do not include 44 GlobalCapital June 2015 Formosa Bond Roundtable 'securities' in our English title. In Taipei bonds in Taiwan; for others, it was their first Exchange all kinds of securities can time issuing them anywhere. be traded, and we also have different Maybank is one issuer that chose Taiwan boards. Fixed income products as well as for its debut RMB bond. Eddy, what were the derivatives, such as interest rate swaps, SARAH CHEN, reasons for this? What were the benefits of E.Sun Bank. bond forwards, and some other option choosing Taiwan as your target market? products, can also be traded. We also launched a gold trading platform and a Eddy Lui, Maybank: In 2015, we aim to trading platform for mutual funds. establish a Greater China RMB hub in Hong Kong. We have never issued any Dim Sum Hong, GlobalRMB: Can you outline the bonds in Hong Kong before, but we chose listing activities of international bonds and Taiwan to issue our first RMB bond because Formosa bonds in Taiwan over the past two Maybank has good connections with many years? Taiwanese local life insurers. After we issued our first dollar- Liu, TPEx: Starting from 2005, we began to denominated bond in Taiwan in 2014, see the listing of international bonds here many life insurers and banks approached in Taiwan, but the timing was not right, us and asked us if we would like to issue because demand was not there. We’ve Sarah Chen, E.Sun Bank: This year the RMB-denominated bonds. That is why we made many changes since 2012, after the Financial Supervisory Commission chose Taiwan to be our target market to RMB clearing bank was set up by China’s (FSC) launched the Financial Import issue our first RMB bond. central bank, and companies were allowed Substitution Program in order to attract Of course, we would like to promote our to issue Formosa bonds in Taiwan in 2013. more investment activity from overseas to company here in Taiwan. We are grateful At the very beginning, the issuance volume Taiwan. Taiwanese underwriters typically for Taiwan's local life insurers and banks was quite small. In order to promote the lack the experience in underwriting for their support in purchasing our bonds. issuance of Taiwan renminbi bonds, we international bonds, so it is very created a specific board for them. important for them to learn to bridge Hong, GlobalRMB: Compared with issuing In addition, some regulations are now the communication between domestic RMB bonds in Hong Kong, Singapore, or relaxed. Before the launch of the Financial investors and RMB bond issuers from Malaysia, what are the benefits of choosing Import Substitution Program, life insurers’ overseas. Taiwan in terms of pricing and ability to overseas investment was subject to a Local underwriters in Taiwan used to raise funds? stricter investment cap. The removal of mainly focus on the local market. They foreign currency bonds issued in Taiwan have not been very good at bridging the Lui, Maybank: Buyers focus on the yield from life insurance companies' 45% local investors and foreign issuers in return, while sellers focus on credit overseas investment cap has contributed to terms of changes in daily market prices, spread. In terms of RMB bonds, we do not an increase in investment from Taiwanese policy and regulations, and investor think that the credit spread of Dim Sum lifers in the Formosa bond market and the intentions. In the past year, underwriters bonds would be as favourable as that of dollar-denominated international bond — be they banks or securities companies Formosa bonds, so we will continue to market. — have changed a lot because they have issue RMB bonds in Taiwan. At the same time, the liquidity of the to be in line with the international secondary market has also been increasing market. Taiwanese underwriters have to Hong, GlobalRMB: Most of the issuers of as the issuance volume increases. For learn some best practice so that they can RMB bonds in Taiwan have been financial broker-dealers, trading hours can now strengthen their business activities. In institutions. Would it be possible for non- be extended. They are no longer limited the past year, we have observed a huge financial companies from Malaysia to come to trading from 9am to 3pm every change in Taiwan's local underwriters. We to Taiwan to issue RMB bonds in the second day, but can trade 24/7 to cater for the hope that this change will help Taiwan's half of this year? international investors. The flexibility has underwriters go global. been greatly expanded. Lui, Maybank: Yes. In March this year we Hong, GlobalRMB: Sarah mentioned that we took some Malaysian SOEs to Taiwan for Hong, GlobalRMB: For foreign companies have witnessed a lot of changes. This year, a non-deal roadshow. Maybank is the to issue RMB bonds in Taiwan, underwriters in particular, we have seen many foreign largest bank in Malaysia. We contacted our play a very important role. Sarah, as an companies coming to Taiwan to issue RMB business partners, and they have shown underwriter, what changes have you seen in bonds and international bonds. For some great interest in issuing RMB bonds in terms of issuance of RMB bonds? companies it was their first time issuing RMB Taiwan. 46 GlobalCapital June 2015 Formosa Bond Roundtable Hong, GlobalRMB: David, Far Eastern New Because our financials are consolidated, Century (FENC) was the very first non- it was no problem for us to direct the financial company to issue Formosa bonds, money that we raised through RMB in May 2013. First, I would like to know why bonds to pay off the offshore USD debt. you decided to issue an RMB-denominated In a way, it was a tool for us to hedge bond. Secondly, the Formosa bond market against risks. I think that the timing was has been booming this year, but FENC has also right for issuers. Two years ago, we been absent. Are you looking to issue more issued the Formosa bond at an exchange RMB-denominated bonds in the second half rate of Rmb6.14 to the dollar, and it is of the year? now Rmb6.20. As we were the first non- financial company to issue a Formosa David Wang, Far Eastern New Century: bond, we were able to price at an interest FENC has been an active participant in DAVID WANG, rate of 2.95%. That is no longer available Taiwan's capital market, especially the Far Eastern for issuers nowadays New Century bond market, for more than 60 years. Corporation. Around 1989 or 1990, we issued Taiwan’s Hong, GlobalRMB: Why have you not issued first convertible bond. We also issued a any Formosa bonds so far this year? GDR in 1991. Since then, we have engaged digest those deposits. Around that time, in a lot of activities related to equity- the Taipei Exchange and the authorities Wang, FENC: There are many factors to linked securities.
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