Outlook for Hong Kong banks’ yuan business still robust despite recent volatility

Hong Kong’s banking industry is unshaken in its outlook for yuan business despite recent volatility observed in the offshore currency.

Demand is strong and rising for loan and risk management services they provide, with loan bankers at some banks saying strong demand for merger and acquisition financing has already filled out their pipelines well into the third quarter of the year.

Commenting on market concerns over a dip in yuan deposit funding, Helen Wong, greater China chief executive at HSBC, said: “The RMB business is more than just deposits – it is also about lending and risk management. Hong Kong still has a lot of mainland corporates coming here to raise debt financing. As the yuan becomes the top three or top five currency, Hong Kong will see more RMB business volumes. Our regulations and risk management capability are our advantages.”

The depreciation of offshore yuan led to yuan deposits in Hong Kong decreasing by 14 per cent last year. The offshore yuan has risen 1.7 per cent against the US dollar this week after People’s Bank of China’s intervention, wiping out all the depreciation seen last week.

E Zhihuan, deputy general manager at Bank of China (Hong Kong), said: “Hong Kong banks have plenty of opportunities under China’s continued interest rate reform and capital account opening.

The Belt and Road initiatives and the implementation of the 13th five-year plan will translate to concrete businesses for the year. With the yuan now a de facto SDR currency, there is also effective support for Hong Kong’s offshore yuan hub development in 2016.”