'Let Investors Trade Blue Chips Directly In Yuan'

Executive councillor and former head of the Monetary Authority, Joseph Yam, on Monday called on the government to consider allowing investors to trade blue chips in renminbi in the Hong Kong stock exchange, to help further internationalise the country's currency.

Speaking after attending a seminar on Beijing's 14th five-year plan, Yam said the SAR can play a stronger role in helping the country further liberalise renminbi under the national blueprint.

He said the city could strengthen its status as an international financial hub by allowing investors to trade the 50 Hang Seng Index constituent stocks in both the Hong Kong dollar and renminbi.

Currently, those trading stocks using renminbi have their investments converted to and from the Hong Kong dollar.

“My suggestion is that the use of the renminbi as a medium of transaction and as a store of wealth can actually be taken further by making of use of renminbi in capital markets in Hong Kong, in particular the stock market, starting with, for example, the 50 stocks in the Hang Sang Index,” Yam said.

“There is no reason why organisations such as the HKMA could not put alongside the Hong Kong dollar bid and offer prices for those 50 stocks, also a renminbi bid and offer price for those stocks, and up to investors to decide what currencies to use and when to use it, whether they are buying or selling. It’s really up to the investor himself.”

The former Monetary Authority chief stressed that his suggestion would not affect the status of the local currency.

Responding to Yam’s proposal, Salina Yan, Permanent Secretary for Financial Services and the Treasury, said the government is open to allowing more financial products to be traded in renminbi.

She said it's already possible to trade some yuan-denominated products on the Hong Kong stock exchange.

“I notice that the Hong Kong exchange already has such as mechanism. As for the usage of this mechanism, I think it would depend on a range of factors, including market demand, including the regulatory perspective, and including of course policy. As for policy, we’re very much open-minded and supportive of the development of a wide range of products denominated in renminbi and possibly other currencies,” she said.