Hong Kong may scrap the daily yuan purchase limit for local residents before a cross-border stock trading scheme is launched next month, RTHK cited the head of the city’s de-facto central bank as saying on Monday.
Local officials have discussed with the People’s Bank of China plans to scrap the 20,000 yuan daily currency-conversion limit that applies to permanent residents, Norman Chan, head of the Hong Kong Monetary Authority (HKMA), was quoted as saying at a conference.
“The PBoC says it doesn’t see any problems with removing the quota,” he said. “We are seeking to get this arrangement implemented before the start of the Shanghai-Hong Kong Connect.”
“The relaxation of daily conversion cap will prompt more individual investors to involve in margin trading through banks,” the report quoted Andrew Fung, executive director of Hang Seng Bank, as saying.
The stock connect will bring some uncertainty to market liquidity, and may cause big swings in interest rates, Fung added.
Hong Kong will set up a 10 billion yuan intra-day repurchase facility, according to Chan.
HKMA will also soon unveil a list of five to six banks that will act as “primary liquidity providers” for the yuan. And, they will have their own access to intra-day and overnight repos.
“The rate arrangement for the repo facility remains unclear, therefore it’s difficult to forecast which option will be preferred by the industry in terms of yuan borrowing and lending, but we hope it will act like sectional parking fee,” Fung said.
The yuan capital pool in Hong Kong is sufficient to deal with the stock linkage in the beginning, Fung said, adding that both measures are “back-up”.
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