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Hong Kong's daily yuan exchange volume could rise 20 per cent once the through train stock scheme kicks off, says Hang Seng Bank.
The city's yuan pool was expected to expand once investors started converting into the mainland currency to trade Shanghai stocks under the through train scheme, said Andrew Fung, an executive director and head of global banking and markets at Hang Seng Bank, yesterday.
The stock scheme is expected to begin in October.
The daily interbank yuan trading in Hong Kong currently ranges between US$5 billion and US$6 billion, according to Fung.
The stock scheme, announced last month, caps Hong Kong trade in mainland stocks at 13 billion yuan (HK$16 billion) a day, or a total of 300 billion yuan for an unspecified period.

	[The through train] scheme would have a impact on the mainland market

	YUAN JI, GZHS RESEARCH
For mainland investors, their investment in Hong Kong stocks is limited to 10.5 billion yuan per day and up to 250 billion yuan in total.
Fung said he expected the daily exchange limit of 20,000 yuan for individual Hong Kong residents to be removed before the through train scheme was implemented, which could further deepen the city's yuan deposit pool.
The scheme could also trigger a revaluation of mainland shares once the floodgates were opened as Hong Kong investors were expected to pile into the dually listed financial stocks in Shanghai, which were trading cheaper than their Hong Kong counterparts, said Yuan Ji, the chief research officer at GZHS Research.
GZHS is a Guangzhou-based securities advisory firm owned by Hang Seng and Guangzhou Securities.
"The financial sector accounts for about 30 per cent of the A-share market and is trading at a discount to H shares, so such a scheme would have a fundamental impact on the mainland equity market," Yuan said.
Mainland banks accounted for nearly half the total market capitalisation of the 84 stocks dually listed in Hong Kong and Shanghai while non-bank financial firms accounted for a further 11 per cent, said Yuan.
The price-earnings ratio of dually listed mainland banks is 4.7, compared with 7.9 for H shares. For insurance stocks, the average ratio stood at about 13 in the mainland market, compared with 29 in Hong Kong, Yuan said.
Apart from the financial sector, health care, consumer staple and technology sectors were also trading at a discount to H shares, he said.


Through train stock scheme forecast to fuel yuan trade in Hong Kong

Hang Seng Bank's Andrew Fung says more investors would convert their funds into yuan to trade mainland shares. Photo: May Tse

Business

Banking & Finance

Hang Seng Bank says forex volume in the mainland currency could rise 20 per cent


Hong Kong's daily yuan exchange volume could rise 20 per cent once the through train stock scheme kicks off, says Hang Seng Bank.


Through train stock scheme forecast to fuel yuan trade in Hong Kong

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Hang Seng Bank says forex volume in the mainland currency could rise 20 per cent

Hang Seng Bank says forex volume in the mainland currency could rise 20 per cent