HONG KONG, CHINA – JUNE 05: A pedestrian walks by an digital display displaying the numbers for the Cling Seng Index on June 5, 2023 in Hong Kong, China. (Photograph by Chen Yongnuo/China Information Service/VCG by way of Getty Photographs)
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Buyers will now be capable to commerce chosen Hong Kong shares in each the Hong Kong greenback and Chinese language yuan within the so-called twin counter scheme that launched Monday.
The newly launched “HKD-RMB Twin Counter Mannequin” will see an preliminary 24 corporations begin providing yuan counters to permit traders in Hong Kong to commerce within the yuan, along with the Hong Kong forex. Corporations on the listing embrace tech heavyweights like Tencent, Alibaba and Baidu.
The twin counter mannequin covers securities listed in each Hong Kong greenback and renminbi counters solely. The Hong Kong Trade mentioned all shares of the identical securities within the two totally different buying and selling counters will probably be “absolutely interchangeable between counters.”
In an unique interview on CNBC’s “Squawk Field Asia,” Hong Kong Exchanges and Clearing CEO Nicolas Aguzin mentioned the transfer was aimed toward giving traders extra choices for investments, in addition to extra diversification potentialities.
“This program is aimed toward primary, ensuring that we give extra choices to traders. Quantity two, that we proceed serving to on the internationalization of the renminbi.” Thirdly, he mentioned it “solidifies” Hong Kong’s position as a yuan buying and selling hub.
The HKEX CEO famous that the preliminary batch of 24 corporations make up about 40% of the common every day buying and selling quantity within the Hong Kong.
“We’d count on that to proceed increasing,” he added. “And over time, I believe an important majority of the shares in our markets will probably be taking part on this program.”
With buying and selling volumes in Hong Kong at a 4 yr low, Aguzin mentioned he expects a rise in turnover from the brand new twin join mannequin, noting there are “so much” of yuan deposits in Hong Kong. As such, “you are tapping a liquidity pool that’s in renminbi that may now be capable to make investments immediately,” he identified.
The important thing goal is to simplify the southbound move of investments from the mainland, Aguzin mentioned.
Investments from the mainland are at the moment carried out by way of the Southbound Inventory Join, which permits mainland traders to buy Hong Kong shares in Hong Kong {dollars}.
Inventory Join is a mutual market entry program that enables traders in mainland China to commerce and settle shares in Hong Kong by way of exchanges and clearing home of their dwelling market, and vice versa.
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Aguzin highlighted that it is “very inconvenient for the mainland traders, [and] the truth that they’ll [now] be capable to transact instantly foundation in renminbi, that is an enormous distinction.”
He foresees extra funding move from the mainland, particularly from retail traders.
“One of many challenges of Hong Kong is it is solely 7 million individuals. So it’s totally restricted by way of retail. However the mainland, 1.4 billion individuals, that is so much. And quite a lot of that may come by means of Inventory Join and assist liquidity in our market.”
The twin counter mannequin will initially goal the choices at traders holding offshore yuan, and ultimately, allow mainland traders to commerce yuan shares listed in Hong Kong utilizing onshore yuan, Reuters reported.
Whereas there is no such thing as a agency date for when investments by way of Inventory Join will be capable to entry the twin counter mannequin, Aguzin mentioned this may take somewhat little bit of time, and the HKEX is working carefully with regulators and different stakeholders to ensure all the things will probably be in place earlier than making an announcement.
Not the primary attempt
This isn’t the primary time that such a scheme is being launched in Hong Kong.
In 2012, the Hong Kong trade launched an analogous scheme known as the “twin tranche, twin counter” mannequin, which allowed the issuer to supply and listing two tranches of shares in each the Hong Kong greenback and Chinese language yuan.
As with at present’s twin counter mannequin, shares of each RMB tranche and the HKD tranche had been of the identical class, and shareholders below these two tranches are anticipated to be handled equally.
In line with Bloomberg, that scheme didn’t take off when just one firm took it up.
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The distinction this time is that there’s a “twin counter market maker program” — aimed toward offering liquidity to the yuan counter and minimizing worth discrepancies between the Hong Kong greenback and yuan counters.
Aguzin mentioned there are at the moment 9 of those market makers which have signed up, and he thinks this “ought to encourage quite a lot of exercise and [make] positive that the markets are actually stabilized in each markets.”