Plunging China trade loans test Singapore banks

SINGAPORE: Singapore banks, which have enlarged their China credit exposure in recent years, were hit by a drop in billions of dollars of China trade financing deals as mainland borrowing conditions became easier while offshore interest rates grew more expensive.

The premium of the onshore six-month Shanghai interbank offered rate to the offshore six-month CNH Hong Kong interbank offered rate shrank to 0.3% as of the end of March, from as wide as 2.3% in the first half of 2014. That’s the smallest premium since the offshore yuan interest rate benchmark was launched in 2013, and makes offshore lenders a less attractive option for mainland borrowers.