Hong Kong’s family office push, investment scheme and US rate cuts to spur demand for yuan assets: Standard Chartered
- Potential US rate cuts this year will redirect capital flows to markets and currencies in Asia, boost the yuan and create demand for yuan products, John Thang says
- Hong Kong government’s efforts to promote family offices and the investment migration scheme will create more demand for yuan-denominated products
The anticipated US interest-rate cuts, the Hong Kong government’s measures to attract family offices and the coming investment migration scheme will attract investors to yuan-denominated assets this year, according to a senior executive at Standard Chartered Bank.
The lender, one of the three note-issuing banks in the city, believes the Federal Reserve will start cutting rates from the second half of the year by 75 basis points, which will diminish the lure of US dollar assets and draw funds back to Asia, according to John Thang, managing director and head of financial markets for Hong Kong, Taiwan and the Greater Bay Area.
“Such a trend will support capital markets and currencies in Asia,” Thang said at a briefing on Wednesday. “It will also mean deposits, shares, bonds and other investment products denominated in yuan will be more attractive this year.”
Thang expects the US rate cut will support the yuan, which will appreciate by about 2 per cent, to 7 yuan per dollar this year. The yuan, currently trading at about 7.18, has depreciated by more than 13 per cent since March 2022, when the US started increasing rates in its latest rate cycle.
The Fed increased interest rates by 525 basis points in 17 months until July last year, attracting fund flows to US dollar assets. The DXY index, which tracks the dollar against a basket of major currencies, surged 14 per cent from March 2022 to 113.29 in October 2023, its strongest level in 20 years. It currently stands at 102.51, a 10 per cent decline from the peak because of rising expectations of a rate cut since the fourth quarter.