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HK to lift daily stock of yuan in scheme
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HONG Kong plans to boost daily supply of yuan as demand for the currency is set to surge when a pilot program allowing access to Shanghai and Hong Kong stock exchanges starts next month.
The Hong Kong Monetary Authority will set up a 10 billion yuan (US$1.6 billion) intraday repurchase facility to ensure that yuan payments are handled smoothly for the Shanghai-Hong Kong Stock Connect which is set to start in October, Chen Delin, chief executive of HKMA, told a financial market summit in Hong Kong yesterday.
“Demand for yuan is estimated to be huge as the stock connect program may start soon,” Chen said on the sidelines of the summit. “The repurchase facility will promote efficient yuan payments between banks.”
Chen said five to six banks will act as primary liquidity providers and the additional supply will be on top of the offering of Bank of China (Hong Kong) Ltd, the city’s yuan clearing bank.
Chen also said the HKMA is discussing with the People’s Bank of China to seek removal of a 20,000 yuan daily cap on currency conversion for its residents before the stock connect scheme is launched, to further encourage investment in mainland stock markets.
The scheme is seen to open China’s capital market further and internationalize the yuan. It will allow a net 23.5 billion yuan in cross-border purchase of equities between the Shanghai and Hong Kong exchanges.
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