StanChart sees China debt market potential

SINGAPORE/HONG KONG, Nov 11 - China's booming yuan-denominated debt market is now one of Asia's most active and the key one for foreign investors to watch in the region, a top debt executive at Standard Chartered said on Tuesday.

Asia's local-currency bond markets are growing robustly but the yuan-bond markets are developing as the regional leader, said Deepak Kohli, global head of debt capital markets for Standard Chartered.

"The Chinese bond market is definitely a market to watch, and not just in the context of Asia, but globally too, because issuance is growing, volumes have become large," he said in an interview for the Reuters Global Finance Summit.

Sales of yuan currency corporate bonds have totalled 182 billion yuan ($26.66 billion) so far this year, according to the Chinese government securities clearing agency, more than double year-earlier sales. Lenders and policy banks sold an additional 883 billion yuan in debt this year.

Growth came even though markets elsewhere are shrinking in the face of the global financial crisis.

Yuan-bond issuance is dominated by Chinese state-owned enterprises and financial firms, but recent relaxations in regulations could encourage smaller firms to sell debt in local markets.

Most foreign issuers are barred from selling yuan-denominated bonds, although the government has provided some encouraging words.

"One of the key enablers of Chinese yuan bond markets being a dominant part of Asian issuance, or even being relevant to global markets, would be when they open that up for foreign issuers," Kohli said.