SHANGHAI/HONG KONG : China's gradual internationalisation of its currency will shift to its next leg on Monday when about two dozen Chinese companies start trading in their home currency in Hong Kong's stock market.
Fund managers say the step reflects Beijing's desire to expand the use of yuan outside China and provide another avenue for yuan-denominated investment, thus reducing the risk of capital outflows chasing higher yielding currencies such as the U.S. dollar. The initiative comes amid a steady stream of bilateral yuan-denominated deals China has struck with trading partners, from Chinese oil purchases in the Middle East, to commodities trade with partners from Brazil to Russia. Beijing has retained close ties with Moscow despite the invasion of Ukraine.
"When a currency is internationalised, it's not only used in trade, physical goods, or services. It also has to be parked in investment vehicles," said Dong Chen, Head of Asia Macroeconomic Research at Pictet Wealth Management. Fund managers expect a lukewarm interest in the yuan counters initially, given near-term risks including a weakening yuan and wobbly stocks as China's economy struggles. But they expect demand to pick up over time.
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Source: ChannelNewsAsia - 🏆 6. / 66 Read more »