In a pioneering move, UK
insurer Aviva has launched the first single premium
non-participating endowment plan denominated in Chinese renminbi in
Singapore. The new product has been branded the Dragon Renminbi
Plan (DRP) and offers an annual yield of 2.85%. The minimum single
premium is CNY250,000 ($39,500).
“We felt that the time was
right for us to offer a renminbi product to our customers, backed
by a rewarding yield,” said Simon Newman, CEO, Aviva Singapore.
“The Dragon Renminbi Plan is the first product of its kind and
unlike anything seen in this market before.”
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DRP is to be distributed
exclusively by Singapore bank DBS Bank which has about 100 branches
across the island state.
The major attraction of the
DRP is being pitched as the exposure it provides to what is
generally perceived as an undervalued Chinese currency.
Alluding to this, Newman
says: “As the only renminbi endowment product in the market right
now, the plan provides investors with a mid-term financial planning
solution into a currency that is expected to gradually appreciate
in the next five years.
“Moreover, with the fixed
return of 2.85%, it allows investors to gain access to China
without taking on excessive market risk.”
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By GlobalDataAdding additional emphasis to
DRP’s currency appeal, Jeremy Soo, MD and head of consumer banking
for DBS Bank in Singapore, said: “The launch of the Dragon Renminbi
Plan provides our customers with another product that leverages on
the rise of Asia and China’s growth, allowing them to enjoy
potential currency gains.”
He added that since, DBS Bank
has seen strong demand for the first renminbi-denominated products
it launched in February 2011.
These comprise current and
fixed-deposit accounts, currency-linked investments,
renminbi-denominated bonds, unit trusts and structured
notes.
“We’re confident the demand
for renminbi-denominated products will continue as investors seek
to diversify their portfolio and capitalise on the relative
strength of the Asian economy,” Soo said.
Whether betting on a
significant revaluation of the Chinese will prove worthwhile
remains to be seen. With the exception of small upward adjustments,
China has steadfastly refused to bow to foreign pressure and
revalue its currency significantly. The renminbi has revalued from
about CNY7.30 to the US dollar in early-2008 to about CNY6.40 to
the US dollar.
Estimates of how much the
renminbi is undervalued are many and varied. A study by the US
Congressional Research Service, published at the end of 2010, noted
that China’s currency is undervalued by at least 40% against the
dollar and by 25% on a trade-weighted basis.
Aviva and DBS have been in a
bancassurance partnership since 2001, which the UK insurer
emphasises has been a significant contributor to Aviva’s strong
growth in Singapore.
The insurer reports that in the third quarter of 2011, its
life insurance sales increased by 65% compared to the same period
in 2010. The biggest driver of growth in 2011, noted Aviva, has
been bancassurance sales which in the nine months in 2011 were
three-times higher than in the same period in 2010.
