Hong Kong has the potential to push RMB-denominated shares

Chief Executive Carrie Lam Cheng Yuet-ngor has just released the last "policy address" during his term, pointing out the need to further expand the two-way circulation channels of cross-border RMB funds, and the development of offshore RMB products and tools.

Scholars and investors in the investment community believe that to transform Hong Kong’s over 800 billion RMB offshore capital pool from “still water” to “live water”, research on RMB-denominated stocks is a major direction that will help seize opportunities for RMB internationalization.

With the official launch of the China-Hong Kong stock market interconnection mechanism from 2014 to 2016, the trading quotas of Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect have gradually expanded. Nearly 30% of the market turnover (an average of 165.8 billion yuan per day) is enough to drive investor demand for RMB-denominated shares.

Once China and Hong Kong formally implement the inclusion of Southbound Southbound Stock Connect stocks in RMB, more than 500 Hong Kong stocks will have the opportunity to adopt it. Among them, blue chip stocks and high-volume Southbound stocks are expected to be included first.

Allowing mainland investors to directly use RMB to buy Hong Kong stocks can not only save the exchange rate conversion procedures, avoid the risk of exchange rate fluctuations, and be more convenient to operate. I believe it will positively help boost the turnover of Southbound Trading.

In addition, the new plan can also speed up the internationalization of the renminbi, thereby consolidating Hong Kong’s status as an offshore renminbi center.

Source: HKMA, Hong Kong Stock Exchange.

"Hong Kong 01" drawing.

Guan Zhuozhao, director of the Center for Business and Economic Research of Crown Lands, pointed out that when the number of RMB-denominated shares increases, Hong Kong needs to have sufficient RMB funds for exchange.

According to data from the Hong Kong Monetary Authority, Hong Kong's offshore RMB deposits in August 2021 were approximately 842.7 billion yuan.

The scale of RMB settlement in Hong Kong's Real Time Gross Settlement (RTGS) has even exceeded the daily settlement volume of Hong Kong dollars in the system, and the average daily settlement volume in 2020 will exceed RMB 1.19 trillion.

For details, please read the 285th "Hong Kong 01" Electronic Weekly Report (October 10, 2021) "

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