Non-residents grab yuan products in HK

Non-resident retail investors lapped up offshore yuan deposits and other products in Hong Kong on Wednesday, the first day of the launch of the service in the city, bankers said.

Hong Kong banks kick off their non-resident yuan business this month after a ruling that allows non-residents to open yuan accounts in the city and convert other currencies into yuan without any limit.

Analysts say this new channel will help strengthen Hong Kong's edge as an offshore yuan center by bringing in more money from foreigners seeking higher-yielding investments in an environment in which most major central banks are easing monetary policy.

Hong Kong was previously at a disadvantage, losing out on yuan flows from foreign retail investors to financial centers in Singapore and London as Hong Kong banks could only offer yuan services and products to local residents, with a daily conversion quota of 20,000 yuan ($3,138). No such restriction exists in any of the other centers.

The Hong Kong Monetary Authority's latest measures were not a surprise to market participants, who had been expecting further steps from the authorities to shore up Hong Kong as an offshore yuan trading center.

Yuan traders expect offshore yuan investments would appeal to a wide range of foreign investors, particularly high net worth ones in Southeast Asia, as well as small and medium businesses flocking to the convenience and flexibility of trading via the CNH market.

"There is demand for renminbi assets from non-residents who would like to rebalance their portfolios, especially those holding quite a lot of non-dollar assets," said Ngan Kim Man, head of renminbi business strategy and planning department at Hang Seng Bank.

Given the central government's efforts to promote the yuan outside its shores are likely to lean now towards individuals, after having focused on businesses for the past few years, the influx of non-resident investors will prepare Hong Kong for any opportunities from future loosening of yuan policy, he added.

Hong Kong offers a variety of yuan investment opportunities, including offshore yuan bonds known as 'dim sum' bonds, insurance products, structured deposits, exchange traded funds and other renminbi products. However, most of them are only available to those who have renminbi accounts with banks.

Non-residents can open yuan accounts from August, and some banks are offering attractive deposit rates to lure new clients. Hang Seng Bank pays an annualized interest rate of 6.38 percent for one-week yuan deposits in August.