Explainer | What is the ‘dual-counter model’ and why should investors care about Hong Kong’s latest equity innovation?
- The yuan share trading counter programme, initially covering 24 stocks with US$154 billion market capitalisation, will attract both mainland and international investors
- Hong Kong has close to 1 trillion yuan in deposits, which can currently earn only a modest rate of interest. Yuan shares can offer better returns
Investors will be allowed to use offshore yuan funds to buy yuan-denominated shares listed on the Hong Kong stock exchange later this month in what is seen as a major landmark in the internationalisation of the Chinese currency.
The so-called dual counter model is a general term used to refer to the Hong Kong dollar-yuan dual counter’s overall trading, market making, and settlement model.
Starting June 19, bourse operator Hong Kong Exchanges and Clearing (HKEX) will offer investors a choice of trading in Hong Kong dollars or in yuan for 24 listed companies whose combined market capitalisation HK$12 trillion (US$154 billion) represents 35 per cent of Hong Kong’s total and whose shares account for 40 per cent of the total turnover. Under the dual counter model, investors may trade and settle in Hong Kong dollars and yuan under the respective counters.
The 24 firms include Tencent Holdings, AIA Group, Bank of China (Hong Kong) and Alibaba Group Holding which owns this newspaper, and investors will be offered a yuan-shares trading option in addition to the existing Hong Kong dollar.
Here are what you need to know about this scheme.
What is the HKD-RMB dual counter model?