The dual counter model of the Hong Kong Stock Exchange has set sail, and from now on, RMB can directly buy Hong Kong stocks for internationalization | RMB | dual counter | Hong Kong Stock Exchange
Starting from today, the Chinese yuan can directly buy Hong Kong stocks.
On June 19th, the Hong Kong Stock Exchange officially launched the "HKD RMB dual counter model". For listed companies, this will allow them to have two trading desks, Hong Kong dollars and Chinese yuan, and a stock can be priced in either Hong Kong dollars or Chinese yuan for trading and settlement in both currencies. For qualified investors, trading the stock can be done in either Hong Kong dollars or Chinese yuan.
However, the dual counter model for Hong Kong stocks is being phased in, with the initial focus mainly on Hong Kong or overseas investors. At present, mainland investors are unable to immediately participate in the dual counter model through the Hong Kong Stock Connect. It is reported that the dual counter model under the Hong Kong Stock Connect trading will be implemented in the next stage, but the specific implementation time still needs to be further arranged.
Last month, the Hong Kong Stock Exchange announced the launch of the "HKD RMB dual counter model" and "dual counter banker mechanism". The CEO of the Hong Kong Stock Exchange Group, Eu Guan Sheng, stated that the launch of the dual counter model is another important milestone in the development of the Hong Kong capital market. It will not only provide issuers and investors with more trading options, but also enrich the RMB product ecosystem and consolidate Hong Kong's position as the world's largest offshore RMB center.
What is the dual counter mode? Yao Jiaren, Co Operations Director and Head of Equity Securities at the Hong Kong Stock Exchange, recently stated that the dual counter model means that the same stock has separate Hong Kong dollar and RMB counters, and investors can freely choose to trade on any counter. In other words, for Hong Kong listed companies under the dual counter trading model, investors can trade in Hong Kong dollars or Chinese yuan.
At present, there are 24 securities approved by the Hong Kong Stock Exchange to carry out the dual counter model, including Hang Seng Bank, Sun Hung Kai Real Estate, Shangtang W, Geely Automobile, China Resources Beer, Hong Kong Stock Exchange, Tencent Holdings, CNOOC, China Mobile, Lenovo Group, Kwai W, AIA, Xiaomi Group-W, Anta Sports, Li Ning, BOCHK, Meituan-W, JD Health, JD Group-SW, Baidu Group-SW, Alibaba SW, BYD, Ping An and Great Wall Motors, covering technology, finance, real estate and consumer businesses.
Qualifying securities are securities designated by the Hong Kong Stock Exchange, with Hong Kong dollar and RMB counters, and eligible for the dual counter banker program. Specifically, the standards include securities market value, liquidity, etc., and must meet the qualifications of a dual counter banker. According to institutional analysis, although the specific market value and liquidity standards have not been clearly announced yet, based on the current list of eligible dual counter securities, the current focus is mainly on large cap blue chip stocks.
"The biggest feature of the dual counter model is the market maker mechanism." Yao Jiaren further explained that the market maker mechanism is actually implemented together with the dual counter, which means inviting some large market participants to act as market makers for the RMB counter, also known as market makers, and provide quotation services for bilateral buying and selling. "The advantage of market makers is to narrow the price difference between the two counters and provide continuous liquidity for the RMB counter, allowing investors to have buying and selling targets," he said.
Currently, 9 institutions have obtained market maker licenses. Including four Chinese backed securities firms, including Bank of China International Securities Co., Ltd., China International Finance Hong Kong Securities Co., Ltd., CITIC Lyon Securities Co., Ltd., and Guotai Junan Securities Co., Ltd.
What is the role of the dual counter model in promoting the internationalization of the RMB? Yao Jiaren believes that the dual counter model provides investors with a choice of RMB denominated stocks, promotes the use of RMB in Hong Kong stock trading, and opens up new potential channels for RMB circulation. In the future, more RMB assets will be priced in the international market of Hong Kong, laying a solid foundation for promoting RMB internationalization.
CICC also stated in its research report that the launch of the "Hong Kong dollar RMB dual counter model" is another important milestone in the development of the Hong Kong market and an important step in promoting the internationalization of the RMB. The dual counter model can provide more asset allocation options for offshore RMB, which helps promote the internationalization of RMB development. For the Hong Kong stock market, in the medium to long term, the dual counter model helps to improve the liquidity and trading activity of Hong Kong stocks, further consolidating Hong Kong's position as an offshore RMB center.