The Hong Kong stock exchange (HKEx) is ready for an offshore
Renminbi (Rmb) equity market to develop. But liquidity remains
a concern for issuers.
HKExs Rmb Products Task Force head, Bryan Chan told
delegates at this weeks IFLR Asia Capital Markets Forum
that the exchange was working with the market to develop models
that would facilitate renminbi equities in Hong Kong.
Whether there will be enough renminbi liquidity to
support a renminbi initial public offering (IPO) market and
central market trading of the shares post-listing remains a
concern in the market, he said. We are trying
to raise assurance levels in the market on
He stressed that no matter what happened to renminbi
liquidity, there would always be workarounds available to
issuers and investors in Hong Kong.
A side-by-side counter of Hong Kong dollars together
with renminbi was one solution, he said. Any issuers already on
HKex and shareholders could transfer shares from one to other,
thereby helping arbitrage activities between the two counters
and keeping the prices of the two counters in a reasonable
This would help central markets by reassuring
market participants concerns regarding the potential and
plausible shortage of renminbi liquidity going forward,
New rules in October, relating to Rmb repatriation by
Chinas Ministry of Commerce (Mofcom) and the
Peoples Bank of China (PBOC) had helped develop the
offshore Rmb market in Hong Kong, Chan said.
The rules stipulate only legally obtained
renminbi will benefit from clearer, better-documented and
simpler repatriation, and the definition of legally
obtained Rmb includes the currency raised through bonds
That means that companies raising the currency
through a Rmb-denominated IPO in Hong Kong will benefit from
these rules, he said.
He was confident the market would pick up. The
exchange had had a few enquiries regarding equity issuances, he
said, with some even going as far as coming up with draft
On the derivatives side, Chan said that the exchange
had already completed the enhancements to its trading and
clearing systems. It was planning market rehearsals with
exchange participants in the first quarter of 2012, he
He predicted the first few products on the HKEx would be
equity-related derivatives, such as single stock option, and
equity index products. The exchange had also detected
considerable interest of exchange-traded funds (ETFs), he said.
I expect we will see the first ETF products developed and
traded in Rmb in Hong Kong in the very near future, he
Structured Rmb products would be a logical sequence of
development in the market. But Chan did not expect this to
HSBCs managing director and Asia-Pacific
transaction head, Pius Chong anticipated more demand for Rmb
bonds, and a lengthening of the tenures on such bonds as more
international investors and traditional fixed income investors
participated in the market.
I expect we will see more RMB bonds get listed
not just on the HKEx but also across European exchanges
too, he said.