Financial Secretary Paul Chan Mo-po (fourth from right) inaugurates the HKD-RMB Dual Counter Model with the customary sounding of the gong with HKEX chairwoman Laura May-Lung Cha (fourth from left) as the CEO of HKEX, Nicolas Aguzin (third from right), looks on along with other officials in Central, Hong Kong, on June 19, 2023. (CALVIN NG / CHINA DAILY)
HONG KONG - The HKD-RMB Dual Counter Model was launched on Monday at the Hong Kong Exchanges and Clearing (HKEX) to further support the RMB development in the Hong Kong securities market.
Financial Secretary Paul Chan Mo-po inaugurated the counter with the customary sounding of the gong along with HKEX chairwoman Laura May-Lung Cha.
The HKEX introduced the HKD-RMB Dual Counter Model to the secondary market for trading and settlement purposes. The HKEX's Dual Counter Model allows investors in Hong Kong to trade stocks concurrently in both Hong Kong dollar and the yuan.
"Today is really another significant milestone for our stock market," Chan said at the ceremony. "It is clear that the internationalization of RMB will only accelerate in the future, particularly under this rapidly changing global geo-political and environment – which is unseen in a century. Seeking diversification for greater security is on everyone's agenda."
He said that as countries trade and invest in RMB and use it as a reserve currency, the demand for various investment and risk management products is bound to rise.
"Hong Kong will play a pivotal role in this great process of change, and we are keen to grasp the opportunities ahead. We have long been the offshore RMB hub, no matter in terms of liquidity, trade settlement or product variety," Chan said.
A total of 24 companies will start offering yuan counters at the scheme's launch.
The HKEX's Dual Counter Model allows investors in Hong Kong to trade stocks concurrently in both Hong Kong dollar and the yuan
The HKEX has said all shares of the same securities in the two trading counters will be fully interchangeable between counters. They will be designated as the HKD-RMB Dual Counter Securities.
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The exchange will initially target the offerings at investors holding offshore yuan.
The yuan counter will be listed separately under a different, 5-digit stock code that begins with "8"; while the Hong Kong dollar counter will follow a 5-digit number starting with a "0".
Financial Secretary Paul Chan Mo-po speaks after inaugurating the HKD-RMB Dual Counter Model at the Hong Kong Exchanges and Clearing in Central, Hong Kong, on June 19, 2023. (CALVIN NG / CHINA DAILY)
The HKEX is also rolling out a market-maker program, so that any price differences between the two counters because of the yuan's moves can be reduced.
The first batch of investors could be holders of offshore yuan deposits in Hong Kong, which totalled 833 billion yuan ($117 billion) at the end of April, as they look for potentially higher returns in the stock market.
Yuan holders in China's trading partner countries, such as Russia, Pakistan and the Middle East, could also be potential investors.
READ MORE: Chan: HK to play unique role in RMB internationalization
The HKEX is working with mainland regulators to allow mainland investors to eventually participate via the Stock Connect investment channel that connects the Hong Kong, Shanghai, and Shenzhen stock exchanges.
"And thanks to the staunch support of the central government, our currency swap arrangement with the People’s Bank of China ensures that we have more-than-enough liquidity," Chan said.
"Looking ahead, we are determined to expand the channels for cross-boundary RMB flow, provide more investment and risk management products, and upgrade our related infrastructure to build an even more vibrant offshore RMB ecosystem."
With Reuters inputs
