Refusal by Taiwan's Ministry of Finance to grant tax exemptions for offshore banking units of domestic banks floating renminbi-denominated bonds might put a halt to the business. The Financial Supervisory Commission has been encouraging the practice, but without the exemptions, enterprises will be likely instead to issue dim sum bonds in Hong Kong.
A Brussels industry group has come out in opposition to the EU's proposed tax on financial transactions. The proposal has German and French backing, but the UK remains strongly opposed. Peter de Proft, director general of the European Fund and Asset Management Association, said advocates of the levy have promoted it using misleading claims.
The People's Bank of China, for the first time in nearly three years, cut reserve requirements for commercial banks. The move indicates China has started easing its monetary stance. "The cut falls within expectations," said Ma Jun, chief economist at Deutsche Bank Greater China. "The current liquidity in the Chinese banking system has become too tight, and the liquidity shortage forced the central bank to inject money into the market."
The euro rose more than 1% after six central banks acted jointly to make it easier for banks to borrow US dollars. However, investors doubt Europe's common currency will be able to maintain those gains. "Nothing's changed, really," said Steven Mitra, co-founder of LNG Capital. "Yes, suddenly, borrowing has become cheaper, but you're fighting leverage with leverage."
A key factor in the yuan's rising value is increasing demand for dim sum bonds, which are bonds denominated in renminbi but traded outside mainland China, often in Hong Kong. Dim sum issuance by Caterpillar, Tesco and Volkswagen, among others, could reach $36 billion this year, a 600% increase compared with last year, HSBC Holdings said.