Date
26 July 2017
Renminbi is tight in Hong Kong amid surging northbound capital outflow. The interbank rate for the Chinese currency hit a two-month high on Tuesday. Photo: CNSA
Renminbi is tight in Hong Kong amid surging northbound capital outflow. The interbank rate for the Chinese currency hit a two-month high on Tuesday. Photo: CNSA

Offshore yuan interbank rate surges amid tight liquidity

Tight liquidity has driven the Hong Kong interbank offered rate for offshore renminbi (CNH) to a two-month high, with money surging northbound through Shanghai-Hong Kong Stock Connect.

On Tuesday, the rate was 4.7080 thanks to 7 billion yuan (US$1.13 billion) in net purchases of mainland equities under the seven-month-old cross-border stock trading scheme, according to the Hong Kong Economic Journal.

Analysts expect liquidity conditions to settle anytime soon, making a spike in CNH deposit rates unlikely.

Also, stressed lenders can use the mainland’s interbank bond market to shore up their war chest, HKEJ says, citing Chan Tak-cheong, Bank of East Asia (00023.HK) head of currency and interest rate transactions.

Liu Kit, a senior interest rate strategist of Standard Chartered Bank (Hong Kong) Ltd., blamed the liquidity squeeze on recent initial public offerings in the mainland which locked in funds and the central bank’s decision to delay a further cut in the reserve requirement ratio.

Liu expects CNH interbank rates to fall this week as the lock-up period expires for some new mainland listings.

Translation by Vey Wong

[Chinese version中文版]

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Hong Kong Economic Journal

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