Hong Kong’s stock trading in yuan starts with one exception

BLOOMBERG 

Hong Kong’s initiative to allow trading of some locally-listed stocks in yuan has seen a muted start, with an average of just 1% of volume in those counters using the Chinese currency. One outlier has been China Mobile Ltd, which has seen yuan trading account for almost 10% of shares exchanged since the ability to transact the stock using the mainland currency began. The telecom firm has been on a US sanction list since 2021, limiting American investment.
The option to trade Hong Kong shares in yuan became available for 24 counters, which account for more than a third of the city’s total market capitalisation.
The tiny proportion of yuan volume so far — based on Bloomberg calculations — reflects the worsening outlook for China’s yuan, and bearish sentiment surrounding the city’s stocks.
“One of the allures for foreign investors of offshore China listings is the pegged exchange rate of the Hong Kong dollar, which removes currency risk at a time when yuan depreciation is a concern,” said Marvin Chen, an analyst at Bloomberg Intelligence in Hong Kong. “If you look at yuan deposits in Hong Kong, while they are the largest in the world outside China, it is still a low-single-digit percentage of Hong Kong dollar deposits.”

Dual Model
The HKD-RMB Dual Counter Model is so far only available to offshore investors, and is yet to be offered over the so-called stock connect, which allows mainland investors to buy Hong Kong shares.
Exchange operator Hong Kong Exchanges and Clearing Ltd has said it eventually aims to allow mainland Chinese investors to trade Hong Kong stocks “seamlessly.”
Holding yuan-denominated assets is becoming less attractive as the outlook for the currency worsens due to the slowing economy and the divergence between the nation’s dovish monetary policy and more hawkish policymakers elsewhere. The yuan slid to a seven-month low in onshore trading.