NSW To Issue First Australian Government Dim Sum Bond After The FTA


While there has been much talk about the trade that will result from the Australia/China FTA, it’s the financial ties that will also hugely benefit Australian business.

This is particularly the case for New South Wales with such a high concentration of banking and finance workers, Sydney as Australia’s financial centre, and now also the designated Chinese Renminbi trading hub.

So it’s no surprise that NSW TCorp, the state government’s AAA-rated borrowing arm will be the first Australian government to issue into the Dim Sum market.

The size of the deal, at a minimum of CNH 1 billion (CNH is the professional market designation for the Chinese currency traded offshore), with a tenor of just one year, it’s a market opener and ANZ analysts Martin Whetton and Kumar Rachapudi said in a note to clients that, “This could open the market for other Australian semi-governments to issue.”

Equally, Whetton and Kumar suggest this deal is specifically aimed at kicking off trade in Sydney in Renminbi:

The appointment of a clearing bank implies that when NSWTC decides to convert CNH proceeds into AUD, it can do so and settle the transaction with the Sydney branch of Bank of China. This leaves open the possibility of the RMB brought into Sydney staying in the local market – thus creating the conditions necessary for Sydney to become an offshore RMB hub.

The analysts say that, “ANZ’s China research team believes that if 30% of bilateral trade is to be settled in RMB by 2020, it would represent payment flows of USD48bn or RMB300bn per year.”

That’s huge – Sydney is on its way.

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