* Set to rival Hong Kong and Taiwan
* Yuan deposit-pool sets Singapore ahead of other centres
By Kevin Lim and Michelle Chen
SINGAPORE/HONG KONG, Oct 10 (Reuters) - Singapore has issuedfull banking licences to two Chinese lenders, moving it a stepcloser to getting a yuan-clearing bank that will let it competemore aggressively with Hong Kong in the growing market foryuan-denominated trades and financial products.
Singapore said in July it had agreed to give two Chinesebanks greater access to its retail market and that Beijing willin turn allow one of the two banks to become a clearing bank for
yuan transactions. "The Singapore branches of Bank of China andIndustrial and Commercial Bank of China havecommenced operations as full banks with qualifying full bankprivileges with effect from Oct 5," the Monetary Authority ofSingapore said on Wednesday.
"Implementation details on the RMB clearing bank will beworked out by the relevant agencies in Singapore and China indue course," the Singapore central bank added. RMB or renminbiis another term for the Chinese yuan.
Singapore, the world's fourth-largest forex trading centreand the main Asian base for oil and commodity traders, is widelybelieved to have the largest pool of yuan deposits outside ofChina and Hong Kong, according to industry players.
Citing a Singapore official, China's state-run Xinhua newsagency said in June the Southeast Asian city-state has around 60billion yuan ($9.54 billion) in yuan deposits, placing it wayahead of other financial centres other than HongKong.
DBS Group , Singapore's biggest lender, is a bigplayer in the offshore yuan market with over 35 billion inoffshore yuan deposits in Singapore and Hong Kong as of June 30.DBS last year executed nine offshore yuan transactions totalling12.63 billion yuan, its spokesman said.
"I expect a clearing bank to be set up (in Singapore) beforethe end of the year," said Woon Khien Chia, head of localmarkets strategy of emerging Asia at Royal Bank of Scotland.
China has to date appointed yuan-clearing banks for HongKong and Taiwan, allowing companies in these two places toconvert various currencies into yuan as well as offeryuan-denominated loans.
FIERCE COMPETITION
The competition to become a major centre for offshore yuantransactions has intensified over the past year as China showsan increasing willingness to loosen capital controls andpromotes the use of its currency for trade settlement.
Besides Singapore, London is also keen to get a bigger sliceof the yuan business.
But Singapore appears to be the bigger threat to Hong Kong,however, given its large yuan deposit base.
Dynasty Real Estate Investment Trust, backed by Hong Kongbillionaire Li Ka-shing, is set to become Singapore's firstyuan-denominated initial public offering. The Wall StreetJournal reported on Wednesday that Dynasty has already beguntaking orders for its planned IPO.
Singapore-based firms such as Global Logistics Properties
and Singamas Container Holdings have also issuedyuan-denominated bonds, also known as dim sum bonds.
Meanwhile, Chinese asset management firm Harvest GlobalInvestments said it will launch its yuan-denominatedexchange-traded fund (ETF) on the Hong Kong Stock Exchange onFriday. The Harvest ETF will be the first listed financialproduct to be traded in both yuan and Hong Kong dollars.
As for the Singapore market, the entry of the two Chineselenders will present more competition in an already crowdedretail space where the city-state's three banking groups DBS,Oversea-Chinese Banking Corp and United Overseas Bank
are the market leaders.
A qualifying full bank licence allows recipients to open asmany as 25 branches and offer services that include acceptingretail deposits.
The three Singapore lenders will, however, get more scope toexpand their China operations as part of the deal betweenSingapore and China in July.($1 = 6.2878 Chinese yuan)
(Editing by Eric Meijer)
((Kevin.Lim@thomsonreuters.com)(65)(6403 5663))
Keywords: SINGAPORE YUAN/