Dual counter share trading to boost renminbi's internationalization

Financial analysts in Hong Kong expect the new trading mechanism of Hong Kong shares in both Hong Kong dollars and renminbi will further propel the renminbi's internationalization and cement Hong Kong's position as the premier offshore renminbi financing center.

Hong Kong Exchanges and Clearing Ltd (HKEX) on Tuesday announced the upcoming launch of the Hong Kong Dollar-Renminbi Dual Counter Model to support the listing, trading and settlement of renminbi-denominated counters in Hong Kong. The bourse expects the registration of share trading in Hong Kong dollar and renminbi will commence in the first half of 2023, subject to regulatory approval and market readiness.

"Investors have the option to trade in Hong Kong dollar and renminbi at their own wish, depending on their Hong Kong dollar and renminbi availability or need. Together with the proposed initiative of allowing mainland investors to trade renminbi-denominated securities through southbound Stock Connect, this should further enhance trading liquidity of relevant stocks, which should be most welcomed by relevant listed issuers and investors," said Cliff Ip, CPA Australia Greater China deputy president 2022.

Under the proposed model, investors will be able to interchange securities listed in both Hong Kong dollars and renminbi, following enhancements to be made to existing trading and settlement arrangements.

The HKEX will also introduce a new Dual Counter Market Making Program in its securities market to support the liquidity of renminbi counters and minimize price discrepancies between the two counters.

Dual counter market makers engaged in market making and liquidity providing activities may be qualified for stamp duty exemption for their eligible transactions, subject to relevant legislative amendments being passed by Hong Kong's Legislative Council, paving the way to support the initiative of allowing mainland investors to trade renminbi-denominated securities through the southbound Stock Connect, currently being explored with the mainland authorities.

HKEX Chief Operating Officer and Co-Head of Markets Wilfred Yiu said: "The introduction of the dual counter model and the dual counter market making program and other initiatives will help further facilitate and attract dual counter listings and help develop even greater synergies with our current China-related products. HKEX is committed to supporting the renminbi's internationalization and further elevating Hong Kong's role as the world's premier offshore renminbi hub."

As of Nov 30, the total value of deals sealed via the Stock Connects between the Hong Kong Special Administrative Region and the Chinese mainland since the launch eight years ago has reached $16.7 trillion, according to bourse data.