Standard Chartered Plc plans to expand its foreign exchange, fixed-income and commodity sales department by 20 percent in mainland China and Hong Kong over the next 12 months as investment opportunities open up.
“We’ll put great emphasis on the China market,” John Thang, who heads the financial market sales division in northeast Asia, said in an interview yesterday. “With more channels of investment available, Hong Kong banks would be more determined to expand their yuan deposit base, which would provide more liquidity to the offshore yuan market.”
Trading in yuan spot and forwards will increase in Hong Kong after China said Aug. 17 it would allow overseas institutions to invest in its interbank bond market, Shanghai- based Thang said. Standard Chartered can now quote up to $30 million for non-trade-related spot transactions in Hong Kong, compared with $1 million when trading first started on July 21, he said. The bid-offer spread has also narrowed, Thang said.
Standard Chartered, Citigroup Inc., HSBC Holdings Plc and CIMB Group Holdings Bhd. all said this week they plan to apply to invest in the interbank bond market. London-based Standard Chartered’s recruiting plan is the biggest among all its sales teams in northeast Asia, Thang said.
The yuan traded at 6.7991 per dollar as of 3:06 p.m. in Shanghai, from 6.7972 yesterday, according to the China Foreign Exchange Trade System. Twelve-month non-deliverable forwards were little changed at 6.6892, reflecting bets the currency will advance 1.6 percent, according to data compiled by Bloomberg.
China ended the yuan’s two-year dollar peg on June 19, allowing greater flexibility. The currency will appreciate 4.5 percent against the greenback over the next 12 months, David Carr, Singapore-based global head of financial market sales at Standard Chartered, said yesterday in the same interview.
China needs to develop money-market indexes for offshore investors like the Hong Kong interbank offered rate, or Hibor, and the China interbank offered rate, Carr said.
“We need the indexes to facilitate the market and increase liquidity in foreign-exchange forwards and money markets,” he said.
The mainland opened its banking industry to overseas companies in December 2006, sparking a rush among foreign banks including HSBC, Citigroup and Standard Chartered to start up branches to compete for the nation’s $7.6 trillion corporate and household savings.
Yuan deposits in Hong Kong climbed 4.8 percent in June to a record 89.7 billion yuan ($13.1 billion), according to data released by the Hong Kong Monetary Authority on July 30.
“Hong Kong investors’ demand for yuan-denominated assets will be significantly bigger in one year’s time,” said Thang.