offshore market of ¥ uan --------- ¥ uan is on the way to internationalization presented by: qian...
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OFFSHORE MARKET OF ¥ UAN--------- ¥ UAN IS ON THE WAY TO INTERNATIONALIZATION
Presented By:
Qian Gao
Zahra Rezapour
Lulu Dong
AGENDA Offshore Yuan Market Definition Features Demand for Yuan ImportanceYuan bonds Good Investments’ Dim Sum BondsNew Yuan Products InfluencesSuggestions on Internationalization of
Yuan
OFFSHORE MARKET Definition: Activity which is specializing foreign currency loans and deposits is
called offshore finance, and the market is called offshore market. Features compared to onshore market: Market in a broad scope, strength of abundance in capital Loan relationship in market exists between borrowers and lenders
who are non-residents. Basically, offshore markets are not subject to the constraints of
financial laws and regulations governing foreign exchange in host government authorities.
There’s a relatively independent system of offshore market interest rates.
HEAVY DEMAND More banks are scrambling to relocate
foreign exchange traders to Hong Kong.
A growing number of Chinese importers and exporters settle cross-border trade in Yuan.
An increase of demand for Yuan among American businesses.
E.g. McDonald's Corp. and Caterpillar Inc. became the first U.S. non-financial corporations to sell debt priced in Yuan in Hong Kong.
IMPORTANT MEANING
Open up new channels of Yuan’s access to foreign investors.
Boost trade among China’s mainland, Hong Kong and other regional partners.
Further encourage the recognition and acceptance of Yuan by overseas market entities
Make the greatest step by China to make Yuan become world currency in the future.
GOOD INVESTMENTS’
Hong Kong signed an agreement with Beijing to allow companies trade freely in the Yuan
One-year non-deliverable forwards are at about 6.68 Yuan to a dollar, meaning the market expects the currency to appreciate over 1 percent in a year
DIM SUM BONDS Foreign investors face no obstacles when it
comes to dim sum bonds. Encourage the growth of a so-called offshore
Yuan market in Hong Kong, allowing bankers to create new products and services.
Interest has picked up in ways to play the currency's rise against the dollar.
Give access globally to investors who want exposure to the currency.
DRAWBACKS Yuan deposits make up less than 2 percent of
Hong Kong's total bank deposits.
The trend now is to hold Yuan assets, not issue Yuan debt.
Owing debt in Yuan means you will have to pay back even more when it is due, and that's not a good thing when you don't even know how much it's going to appreciate by.
DRAWBACKS Investors who want to speculate on the Yuan,
or companies that need to hedge against its fluctuations could only do so indirectly, through contracts that tracked the currency's moves.
Contracts become useless for businesses that need actual Yuan to buy or sell goods.
INFLUENCE Banks such as Citigroup Inc. and HSBC are
offering investors Yuan-priced bonds and interest-rate derivatives.
Mutual funds dedicated to Yuan-priced investments were created.
Open the doors to wider issuance of Yuan-denominated bonds and other investments
Large trades can be executed relatively quickly in the NDF market.
Opportunities are beginning to emerge.
ACCELERATE INTERNATIONALIZING
YUAN Strengthen the cooperation with neighboring
countries and regions and build trust between investors and the currency Yuan.
Encourage the establishment of free trade and promote the trade settlement in Yuan.
Increase the use of the currency Yuan in foreign investment and financial aid.
Strengthen intergovernmental cooperation on monetary regulations, including the on-going implementation of the Yuan exchange agreement.
Further expand offshore markets of Yuan.
BIBLIOGRAPHY
http://www.foxbusiness.com/markets/2010/07/29/analysis-hong-kongs-yuan-bond-market-dreams-face-hurdles/
http://remington-work.blogspot.com/2010/11/dim-sum-bonds-on-menu-for-foreign.html
http://graphics.thomsonreuters.com/AS/pdf/CNYTOCNH.PDF
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aadaesJjOisY
http://cleaves.zapto.org/news/story-2275.html http://news.xinhuanet.com/english2010/
business/2011-01/05/c_13677915.htm