HK's policies aim to loosen offshore yuan
Source: Agencies |
January 18, 2012, Wednesday
|
Print Edition
Print Edition
HONG Kong announced further measures yesterday to liberalize its fledgling offshore yuan market, allowing banks to take on more risks and increase their involvement in the market.
"The key focus is further liberalization," HSBC said of the new measures in a note to clients, adding it should lead to downward pressure on the US dollar in the city's offshore yuan forward market.
"This is part and parcel of the ongoing liberalization and internationalization of the RMB (yuan) - something we see as a key policy focus in 2012," it said.
China has taken a series of measures to invigorate the offshore yuan market in Hong Kong as part of a longer-term plan to promote the use of the yuan overseas and make it a fully-convertible and international reserve currency along with the dollar.
On Monday, Britain said it was teaming up with Hong Kong to secure London a top spot as an offshore trading centre for the yuan as the UK aims to boost trade and investment ties with fast-growing Asian markets.
The Hong Kong Monetary Authority said yesterday it had allowed banks to include their holdings of yuan-denominated China sovereign bonds issued in Hong Kong and bonds traded in the mainland's interbank market in their reserve requirement.
This would allow the banks to have more cash for offshore interbank lending and investment in yuan-denominated bonds, traders and analysts said.
Banks trading in the offshore market must now set aside cash and settlement balances with a yuan clearing bank equivalent to 25 percent of their customer deposits as reserves for the purpose of risk management.
The change in reserve calculation "should exert some downward pressure on CNH (offshore yuan) rates," ING said in a note to clients.
The Hong Kong offshore yuan market has undergone rapid expansion, and analysts said the growth should continue as China encourages investors to make direct investments of yuan in China or buy into the country's securities market.
Yuan deposits in Hong Kong doubled to 630 billion yuan (US$100 billion) in 2011 from a year ago.
"The key focus is further liberalization," HSBC said of the new measures in a note to clients, adding it should lead to downward pressure on the US dollar in the city's offshore yuan forward market.
"This is part and parcel of the ongoing liberalization and internationalization of the RMB (yuan) - something we see as a key policy focus in 2012," it said.
China has taken a series of measures to invigorate the offshore yuan market in Hong Kong as part of a longer-term plan to promote the use of the yuan overseas and make it a fully-convertible and international reserve currency along with the dollar.
On Monday, Britain said it was teaming up with Hong Kong to secure London a top spot as an offshore trading centre for the yuan as the UK aims to boost trade and investment ties with fast-growing Asian markets.
The Hong Kong Monetary Authority said yesterday it had allowed banks to include their holdings of yuan-denominated China sovereign bonds issued in Hong Kong and bonds traded in the mainland's interbank market in their reserve requirement.
This would allow the banks to have more cash for offshore interbank lending and investment in yuan-denominated bonds, traders and analysts said.
Banks trading in the offshore market must now set aside cash and settlement balances with a yuan clearing bank equivalent to 25 percent of their customer deposits as reserves for the purpose of risk management.
The change in reserve calculation "should exert some downward pressure on CNH (offshore yuan) rates," ING said in a note to clients.
The Hong Kong offshore yuan market has undergone rapid expansion, and analysts said the growth should continue as China encourages investors to make direct investments of yuan in China or buy into the country's securities market.
Yuan deposits in Hong Kong doubled to 630 billion yuan (US$100 billion) in 2011 from a year ago.
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