Clearstream To Settle Renminbi

From 27 September, Clearstream will be able to clear and settle asset classes denominated in Chinese Renminbi.

This is one of the biggest things that has happened to Hong Kong for many years, says Philippe Metoudi, head of Client Relations Asia/Pacific/Middle East/Africa at Clearstream.

The move by Clearstream joins a similar announcement by Euroclear. Both firms will be able to settle transactions and deposit Eurobonds and Hong Kong domestic securities denominated in Renminbi from 27 September.

Previously, foreign investors could only settle in Hong Kong dollars if the security was listed on the Shenzhen Stock Exchange, or U.S. dollars if listed on the Shanghai Stock Exchange.

The Chinese government has been slowly relaxing the rules for investing with Renminbi. Since 2004, the Peoples Bank of China has allowed Hong Kong investors to purchase or sell Chinese Renminbi, enforcing a limit of only RMB20,000 per day.

According to Metoudi, in June 2010 there was $12 billion of Renminbi kept in Hong Kong with the local banks. In July, the figure rose to $16 billion, and the August figure is estimated around $20 billion.

The problem with the accounts are that they are non-interest bearing, or interest is very low. It is waiting for investment, says Metoudi. There is a tremendous appetite to invest in Chinese Renminbi.

BOC International Holdings will be the first market participant to issue securities in Renminbi. Standard Chartered will be another major issuer.

The general belief is that Chinese Renminbi will appreciate against the U.S. dollar. says Metoudi. He expects several billion dollars worth of Renminbi to be issued by the end of 2010.

McDonalds, the fast-food giant, recently became the first corporate to issue a Renminbi-denominated bond. The bond issuance, managed by Standard Chartered, sold in less than two hours, according to Sundeep Bhandari, Standard Chartereds regional head of global markets.

Giles TurnerNews Editor