HONG KONG, CHINA – JUNE 05: A pedestrian walks by an digital display screen displaying the numbers for the Dangle Seng Index on June 5, 2023 in Hong Kong, China. (Photograph by Chen Yongnuo/China Information Service/VCG by way of Getty Photos)
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Traders 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 buyers in Hong Kong to commerce within the yuan, along with the Hong Kong foreign money. Firms on the checklist 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 completely different buying and selling counters might be “totally 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 buyers extra choices for investments, in addition to extra diversification potentialities.
“This program is aimed toward primary, ensuring that we give extra choices to buyers. 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 might anticipate that to proceed increasing,” he added. “And over time, I feel an important majority of the shares in our markets might be taking part on this program.”
With buying and selling volumes in Hong Kong at a 4 12 months 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 can now be capable to make investments immediately,” he identified.
The important thing goal is to simplify the southbound circulation of investments from the mainland, Aguzin mentioned.
Investments from the mainland are at present carried out by way of the Southbound Inventory Join, which permits mainland buyers to buy Hong Kong shares in Hong Kong {dollars}.
Inventory Join is a mutual market entry program that permits buyers in mainland China to commerce and settle shares in Hong Kong by way of exchanges and clearing home of their residence market, and vice versa.
Aguzin highlighted that it is “very inconvenient for the mainland buyers, [and] the truth that they may [now] be capable to transact instantly foundation in renminbi, that is an enormous distinction.”
He foresees extra funding circulation from the mainland, particularly from retail buyers.
“One of many challenges of Hong Kong is it is solely 7 million individuals. So it’s extremely restricted when it comes to retail. However the mainland, 1.4 billion individuals, that is so much. And loads of that may come via Inventory Join and assist liquidity in our market.”
The twin counter mannequin will initially goal the choices at buyers holding offshore yuan, and ultimately, allow mainland buyers to commerce yuan shares listed in Hong Kong utilizing onshore yuan, Reuters reported.
Whereas there isn’t any agency date for when investments by way of Inventory Join will be capable to entry the twin counter mannequin, Aguzin mentioned this may take a bit little bit of time, and the HKEX is working carefully with regulators and different stakeholders to verify all the things might 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 identical scheme referred to as the “twin tranche, twin counter” mannequin, which allowed the issuer to supply and checklist two tranches of shares in each the Hong Kong greenback and Chinese language yuan.
As with right this moment’s twin counter mannequin, shares of each RMB tranche and the HKD tranche had been of the identical class, and shareholders beneath these two tranches are anticipated to be handled equally.
In keeping with Bloomberg, that scheme did not take off when just one firm took it up.
The distinction this time is that there’s a “twin counter market maker program” — aimed toward offering liquidity to the yuan counter and minimizing value discrepancies between the Hong Kong greenback and yuan counters.
Aguzin mentioned there are at present 9 of those market makers which have signed up, and he thinks this “ought to encourage loads of exercise and [make] certain that the markets are actually stabilized in each markets.”
