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Six Questions Regarding the Internationalisation of the Renminbi
HKEx Chief Executive Charles Li has written an article in Chinese that covers six key questions about the internationalisation of the renminbi (RMB). The internationalisation of Mainland’s currency has become one of the most widely discussed topics in Hong Kong's finance industry. As a result, Mr Li wanted to offer his views on the subject and explain why he thinks the internationalisation of the RMB is an important issue for the industry and Hong Kong. The following is a summary of the article (the article has been posted in the Chinese-language section of the HKEx website).
September 21, 2010--Internationalisation of the RMB has been one of the hottest topics in Hong Kong's financial press recently. It is also a major component of HKEx’s 2010-2012 Strategic Plan. Through the following discussion, we hope to provide some perspective to this important development particularly in relation to how it is relevant to our markets. We try to address the following six questions:
1.Why is there a need to internationalise the RMB?
2.Is RMB internationalisation feasible and realistic in the current environment?
3.What is the likely roadmap of development?
4.Why Hong Kong can be an offshore RMB centre in this development?
5.What are the commercial opportunities potentially available to Hong Kong?
6.What does Hong Kong need to do to prepare itself?
Question I: Why is there a need to internationalise the RMB?
1. It will help China preserve the fruits of its development to date
There is a need for the Mainland to reduce the size of its foreign exchange reserves to minimise the impact of international financial market volatility on its economy. If the RMB assumes a broader role as a currency for trade settlement between the Mainland and other countries and regions, Mainland enterprises will have less foreign exchange exposure, and the Central Government will face less pressure in managing its foreign exchange reserves.
2. It will help China balance its growth, particularly relating to its trade
There is indeed an imbalance between investment and consumption in the Mainland economy, and between exports and domestic demand. The RMB internationalisation will not directly remove the imbalance, but it has a significant role to play in controlling the growth of the foreign exchange reserves, easing the revaluation pressure on the RMB and increasing coordinated development in economic and trade balance between the Mainland and its major regional partners and resources providers from outside the region.
3. It will help China achieve greater influence in global political and economic affairs
As the world’s second largest economy, China does not have proportional say and influence in international economics and finance. To a large extent, this is the result of a currency that lacks international standing.
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Source: HKExc
FTSE Wins Award For Excellence In Asian Tradable Indexing
September 21, 2010--Global index provider, FTSE Group (“FTSE”), has won the “Structured Products Index Innovation of the Year, Asia” award yesterday for the second time since the award category was introduced in 2008.
Jessie Pak, Director of FTSE Asia said, “FTSE has become a leading global index provider of choice by creating localised and customised index solutions to meet investors’ needs. It is an honour to be recognized for our efforts in providing leading Asian structured and ETF product issuers with innovative solutions that yield new investment opportunities.”
The Structured Products Asia Awards recognise industry excellence and innovation in structured products from banks, distributors, index and technology providers, and exchanges, and are the only awards focused on contributions in the Asian region.
Source: FTSE
Consultation conclusions reached on proposal to introduce scripless securities market in Hong Kong
September 21, 2010-The Securities and Futures Commission (SFC), Hong Kong Exchanges and Clearing Ltd (HKEx) and the Federation of Share Registrars Limited (FSR) jointly released a set of consultation conclusions today, announcing the plan to introduce a scripless securities market in Hong Kong (Note 1).
The proposed operational model is largely similar to that described in the joint consultation paper issued on 30 December 2009 (Note 2).
“Implementation of the scripless regime will be a significant step forward in enhancing the overall efficiency and competitiveness of Hong Kong's securities market, and in securing an appropriate and improved level of investor choice and protection,” said the SFC’s Chief Executive Officer Mr Martin Wheatley.
The scripless regime will be implemented in phases to provide investors with the flexibility of holding securities in physical certificates or in paperless form. The new paperless option will enable investors to hold securities in their own names as registered holders, thus offering more opportunities for straight-through-processing to enhance market efficiency.
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Source: Hong Kong Exchanges and Clearing Ltd (HKEx)
China launches first ESG index, plans corporate governance addition
Joint venture between China Securities Index and Italy’s ECPI
September 20, 2010--China has taken a major step in the promotion of sustainable investment in the country with the launch of its first ESG-based (environmental, social, governance) index, a joint venture between Chinese Securities Index Company (CSI) and ECPI, the Italian-based ESG index and research group.
. The CSI ECPI China ESG 40 Equity Index is made up of 40 domestic companies listed either on the Shanghai or the Shenzhen Stock Exchange, both joint owners of CSI. The index constituents will be the best Chinese companies meeting its sustainability criteria.
Professor Hu Ruyin,?director of the research centre?at the Shanghai Stock Exchange, speaking at the Responsible Investment Association Australasia conference in Sydney last week, said the index was scheduled to launch on September 17.
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Source: Responsible Investor
Mumbai shines as foreigners buy in
September 20. 2010--Mumbai stocks surged to 32-month highs as foreign investors rushed to grab more of the Indian growth story, helping Asian equities advance to near five-month peaks.
The FTSE Asia-Pacific rose 0.4 per cent to 240.44 with the BSE Sensex climbing 1.6 per cent to 19,906.10 as overseas funds bought more shares than they sold for the 13th consecutive session.
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Source: FT.com
DB Global Equity Index & ETF Research-- Asia-Pacific ETP Market Weekly Review
September 20, 2010--Market Overview
There are 236 equity based ETFs in the Asia Pacific region with 329 listings across 12 countries and 15 exchanges. Japan has the largest market share by AUM accounting for 40.85% of the whole market, whilst China has the largest market share by turnover with 35.55%.
There was one new listing during the last week. Korea Investment Trust Management launched one fund tracking Samsung Group companies in the Korean Stock Exchange.
Turnover
Monthly average daily turnover rose 3.3% in the last week. Turnover for the previous week was USD 869m. The largest ETF by turnover was the iShares Asia Trust - iShares FTSE/Xinhua A50 China Tracker issued by BlackRock with USD 137m accounting for 15.8% of total turnover.
Assets Under Management
AUM in Asia Pacific Equity ETPs crossed the USD 70 bn level, rising 7.0% at the end of the previous week. The new USD 70.5bn level is the highest AUM level seen in the region in more than three years. This asset increase was mainly driven by both positive flows and performance in the Japanese ETF market. The largest ETF by AUM is the TOPIX ETF managed by Nomura Asset Management with AUM of USD 8.4bn.
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Source: DB Global Equity Index & ETF Research
FTSE creates new index for State Street’s first Greater China themed ETF
September 20, 2010--FTSE Group (“FTSE”), the award-winning global index provider, has created a new customised version of its FTSE
Greater China Index for State Street Global Advisors Asia Limited (State Street). The new index, FTSE Greater China HKD Index, will be the basis of State Street’s first Greater China
themed Exchange Traded Fund (ETF) which lists in Hong Kong today.
The new FTSE Greater China HKD Index is calculated in Hong Kong Dollars (HKD) and made up of large and mid cap China (H Shares, B Shares and Red Chips), Hong Kong SAR (Hong Kong stocks and P Chips) and Taiwan stocks. Creating products based on the index will give
international investors access to the Greater China growth story without the restriction of Qualified Foreign Institutional Investment (QFII) quotas.
FTSE continues to build on its leadership position in the Chinese market through index benchmarking and the customization of investment solutions which meet the needs of both global and regional investors. Nearly 60% of assets under management in Chinese ETFs listed globally are benchmarked to FTSE’s China Index Series. Licensing the use of FTSE Greater China HKD Index for State Street’s ETF further enhances the wide range of investment solutions available to global investors who want financial exposure to Greater China.
Paul Hoff, Director of Business Development, Asia said, “FTSE indices have become the natural choice for ETF issuers globally who wish to create new, Chinese themed investment products. These indices are built on FTSE’s internationally recognised standards which are widely accepted as the basis for tradable products globally. The new FTSE Greater China HKD index further demonstrates FTSE’s ability to innovate through customisation. We are delighted to have worked with State Street on their new ETF which aims to capture the Greater China growth story.”
Bernard Reilly, Senior Managing Director and Head of Asia Pacific for State Street commented, “There is a growing interest among investors to access investment opportunities across the Greater China region and therefore capture the broader China growth story. China, Hong Kong and Taiwan each have their own unique strengths and advantages which, when combined, generate many vital synergies for long term growth. Choosing the representative and easily replicable FTSE Greater China HKD Index as the basis of our ETF helps investors capture three markets in one in a cost efficient and transparent way.”
The customised FTSE Greater China HKD Index is based on the FTSE All-World Index and therefore adopts award winning methodology which includes free float adjustment and liquidity screens, and is managed in accordance with a clear and transparent set of index rules.
For more information on the construction of FTSE Greater China Index, please visit www.ftse.com/allworld.
Source: FTSE
Tokyo action puts brake on yen
The authorities are alarmed by the yen’s sudden rise, fearing its impact on exports. The central bank sells yen worth US$ 1.21 billion.
September 17, 2010--Japanese authorities reacted negatively to the yen’s sudden rise yesterday, which touched a 15-year high against the US dollar. This morning, the central bank stepped to sell yen in currency markets. This is the first time Japanese monetary authorities intervened since March 2004; the main goal was to protect Japan’s exports.
In yesterday trading, the US currency hit 83.36, a significant loss compared to 83.71 just two days earlier. A few hours before, the greenback even hit 83.25, the best rate since May 1995.
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Source: Asia News.it
Japan intervenes to weaken yen
September 15, 2010--Tokyo intervened in the currency markets on Wednesday for the first time in more than six years, a move that immediately sent the yen lower against the dollar but attracted criticism from Europe over Japan’s decision to act alone.
The unilateral intervention also marks a further easing of monetary policy, since the Bank of Japan has decided to leave in the market the yen which were used to buy dollars, where they will add to general liquidity.
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Source: FT.com
S. Korean bourse signs tie-up deal with Japanese exchange
September 15, 2010--outh Korea's stock market operator Korea Exchange (KRX) signed an agreement with a Japanese exchange on Wednesday to cooperate in the joint development of the regional tech-laden bourse.
The memorandum of understanding with Osaka Securities Exchange (OSE) calls for boosting their cooperation in tech-heavy secondary stock markets -- Korea's KOSDAQ and Japan's JASDAQ to be launched next month, the KRX said in a statement.
Source: Yonhap News Agency
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