The diversification of offshore yuan investment products is hailed as one of the biggest successes in developing the offshore yuan market in 2012, paving the way for wider investment for the growing yuan pool in Hong Kong and to build a healthy and sustainable yuan market.

 

The first yuan-denominated option on Huaxia China Stock 300 ETF (Exchange Traded Fund) issued by BNP Paribas started trading on the Hong Kong stock exchange on December 19, following the listing of the first yuan/Hong Kong dollar dual-currency share in the city a month ago.

 

Other than the dim sum bonds and yuan insurance policies, current offshore yuan investment products in Hong Kong also include yuan REIT (Real Estate Investment Trust), yuan futures, Gold ETF and China A-share ETF. The market witnessed the first stock listing in yuan/HKD dual currencies in October.

 

Shirley Kwok, director and head of retail and listed products sales at BNP Paribas, said the two yuan-based A-share and ETF are drawing more attention from investors. While there is currently no exchange-traded yuan leverage products in Hong Kong, the yuan stock-related option products sold by BNP Paribas have provided new choices for investors.

 

Liao Qun, chief economist for China at CITIC Bank International, said the success of Hong Kong's development as an offshore yuan market this year was mainly due to the policy support from the central government in Beijing, helping to increase the diversification in Hong Kong's offshore yuan products.

 

Tse Kwok Leung, head of the economic and strategic planning department at Bank of China (Hong Kong), said the measures by the central government aim to develop Hong Kong into an offshore yuan center. The measures include RQFII (Renminbi Qualified Foreign Institutional Investor) scheme released last December and the approved quota this year to 270 billion yuan (US$43.3 billion), breaking new ground for developing offshore yuan investment products in Hong Kong.

 

Nathan Chow, an economist at DBS, said the market is moving towards the right direction, and he expects more Hong Kong-developed yuan investment products to be launched, while at the same time, banks that hold the most amount of offshore yuan funds will be more motivated to launch new products as the yuan deposits rise.

 

Chow said the current yuan investment products in Hong Kong are based on the reflow mechanism of yuan to the Chinese mainland, and the process is necessary initially for the offshore market's development. 

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