BNP Paribas Securities Services has exclusively revealed to Global Custodian that it is preparing to launch the ability to trade RMB denominated equities for clients, following the liberalisation of China’s national currency.
“Last year, everyone was blown away by the speed and uptake of RMB fixed-income bonds,” says Barnaby Nelson, head of business development at BNP Paribas Securities Services in Hong Kong. “While Chinese regulatory changes take a notoriously long time to come into fruition, there is no doubt that we are preparing to launch equities in RMB for clients as and when we get the greenlight. Following the appetite and uptake of RMB bonds last year, being able to offer these services will be a walk in the park. Last year, when there was talk of the liberalisation, not everyone took notice, but then as soon as the regulatory changes happened – there was a rush from institutions to implement different services.”
In 2010, China implemented a number of regulatory changes that essentially liberated its RMB policy, that would make it easier for foreign institutions to originate and receive payments for companies trading with Chinese firms. It also allowed foreign entities to access mainland China’s interbank bond market.
However, Nelson highlighted a key challenge that could possibly arise if regulatory changes opened the doors to RMB-denominated equities.
“The main issue is liquidity,” says Nelson. “Around the time of the currency liberalisation last year, there was $200 billion of assets released in Hong Kong. However, everyone scrambled for a piece of that and that quota almost immediately dried up. Now everyone is holding onto these and no one is selling them, which of course creates a unique situation.”
For the full interview with Barnaby Nelson, head of business development at BNP Paribas Securities Services, keep checking out www.globalcustodian.com for the full video interview and for the launch of the Asia-Pacific / Australia section of the site.