Hong Kong’s businesses more upbeat than global peers about yuan’s stability, HSBC poll says

Up to 61 per cent of Hong Kong’s businesses are confident the yuan will be less volatile over the next year, compared with 31 per cent of global companies polled, HSBC said, citing its survey of 1,600 companies in 14 markets

PUBLISHED : Tuesday, 11 October, 2016, 1:13pm
UPDATED : Tuesday, 11 October, 2016, 10:42pm

Hong Kong’s businesses are overwhelmingly more upbeat than their global peers about the prospects and the stability of the renminbi, even as the Chinese currency weakened to a six-year low against the US dollar, according to a survey by HSBC.

Up to 61 per cent of Hong Kong’s businesses surveyed are confident the Chinese currency will become less volatile over the next 12 months, compared with 31 per cent of worldwide companies polled, HSBC said, citing its survey of 1,600 companies across 14 global markets.

“With the rapid growth of RMB-denominated trade settlement in recent years, Hong Kong

businesses have developed a strong understanding of the foreign exchange market and have

become more sophisticated at managing foreign exchange risk,” said Albert Chan, head of commercial banking Hong Kong at HSBC.

Onshore yuan in Shanghai traded Tuesday at 6.7121 against the dollar, 0.11 per cent or 73 basis points weaker than on Monday, its weakest level since September 2010. Offshore yuan also dipped 0.08 per cent or 62 basis points to 6.7211 against the greenback, approaching the low level in January of 6.75 per dollar.

The declines follow the increasingly lower reference points set by the People’s Bank of China, even after the yuan officially became a member of the International Monetary Fund’s Special Drawing Rights (SDR) basket on October 1. The reference point was set at 6.7098 per dollar, down 90 basis points or 0.13 per cent lower than on Monday.

Usage of the yuan, as the Chinese currency is also called, accelerated in 2016, primarily driven by Asia-Pacific economies, the HSBC survey showed.

In Hong Kong, 48 per cent of the companies surveyed use the yuan for cross-border business, while the prospects for growth in trade settlement with yuan are robust with 37 per cent of non-users indicating their intention to start.

Overall, 46 per cent of Hong Kong businesses believe the currency will become an international

trading currency in the next five years.

“As China’s Belt and Road Initiative gains momentum, there will be great opportunities for Hong Kong companies seeking to grow and enhance their competitiveness,” Chan said. “This Initiative will also drive greater cross-border usage of RMB, further promoting internationalisation of China’s currency.”

“Hong Kong businesses can easily benefit from using RMB as a trade currency owing to the city’s position as a premier offshore RMB centre with deep and liquid financial markets,” added Chan.

The survey shows that 77 per cent of businesses are aware of the initiative compared with a global figure of only 41 per cent, however, only about one third of Hong Kong businesses surveyed have yet to pursue a strategy to capture opportunities from the Belt and Road Initiative.

When asked what kind of banking supporting businesses required in connection with the Belt and Road Initiative, more information on the Initiative and the potential opportunities was the top response.