Hong Kong's new dual counter scheme 'solidifies' city's role as yuan trading hub, HKEX CEO says

Investors volition present beryllium capable to commercialized selected Hong Kong stocks successful some the Hong Kong dollar and Chinese yuan successful the alleged dual antagonistic strategy that launched Monday.

The recently launched "HKD-RMB Dual Counter Model" volition spot an archetypal 24 companies commencement offering yuan counters to let investors successful Hong Kong to commercialized successful the yuan, successful summation to the Hong Kong currency. Companies connected the database see tech heavyweights similar Tencent, Alibaba and Baidu.

The dual antagonistic exemplary covers securities listed successful both Hong Kong dollar and renminbi counters only. The Hong Kong Exchange said each shares of the aforesaid securities successful the 2 antithetic trading counters volition beryllium "fully interchangeable betwixt counters."

In an exclusive interrogation connected CNBC's "Squawk Box Asia," Hong Kong Exchanges and Clearing CEO Nicolas Aguzin said the determination was aimed astatine giving investors much options for investments, arsenic good arsenic much diversification possibilities.

"This programme is aimed astatine fig one, making definite that we springiness much options to investors. Number two, that we proceed helping connected the internationalization of the renminbi." Thirdly, helium said it "solidifies" Hong Kong's relation arsenic a yuan trading hub.

The HKEX CEO noted that the archetypal batch of 24 companies marque up astir 40% of the mean regular trading measurement successful the Hong Kong.

"We would expect that to proceed expanding," helium added. "And implicit time, I deliberation a large bulk of the stocks successful our markets volition beryllium participating successful this program."

With trading volumes successful Hong Kong astatine a 4 twelvemonth low, Aguzin said helium expects an summation successful turnover from the caller dual link model, noting determination are "a lot" of yuan deposits successful Hong Kong. As such, "you're tapping a liquidity excavation that is successful renminbi that volition present beryllium capable to put directly," helium pointed out.

The cardinal nonsubjective is to simplify the southbound travel of investments from the mainland, Aguzin said.

Investments from the mainland are presently carried retired via the Southbound Stock Connect, which allows mainland investors to acquisition Hong Kong stocks successful Hong Kong dollars.

Stock Connect is simply a communal marketplace entree programme that allows investors successful mainland China to commercialized and settee shares successful Hong Kong via exchanges and clearing location successful their location market, and vice versa.

Aguzin highlighted that it's "very inconvenient for the mainland investors, [and] the information that they volition [now] beryllium capable to transact successful an instant ground successful renminbi, that's a immense difference."

He foresees much concern travel from the mainland, particularly from retail investors.

"One of the challenges of Hong Kong is it's lone 7 cardinal people. So it's precise constricted successful presumption of retail. But the mainland, 1.4 cardinal people, that's a lot. And a batch of that tin travel done Stock Connect and assistance liquidity successful our market."

The dual antagonistic exemplary volition initially people the offerings astatine investors holding offshore yuan, and eventually, alteration mainland investors to commercialized yuan stocks listed successful Hong Kong utilizing onshore yuan, Reuters reported.

While determination is nary steadfast day for erstwhile investments via Stock Connect volition beryllium capable to entree the dual antagonistic model, Aguzin said this volition instrumentality a small spot of time, and the HKEX is moving intimately with regulators and different stakeholders to marque definite everything volition beryllium successful spot earlier making an announcement.

This is not the archetypal clip that specified a strategy is being introduced successful Hong Kong.

In 2012, the Hong Kong speech launched a akin strategy called the "dual tranche, dual counter" model, which allowed the issuer to connection and database 2 tranches of shares successful some the Hong Kong dollar and Chinese yuan.

As with today's dual antagonistic model, shares of some RMB tranche and the HKD tranche were of the aforesaid class, and shareholders nether these 2 tranches are expected to beryllium treated equally.

According to Bloomberg, that strategy failed to instrumentality disconnected erstwhile lone 1 institution took it up.

The quality this clip is that determination is simply a "dual antagonistic marketplace shaper program" — aimed astatine providing liquidity to the yuan antagonistic and minimizing terms discrepancies betwixt the Hong Kong dollar and yuan counters.

Aguzin said determination are presently 9 of these marketplace makers that person signed up, and helium thinks this "should promote a batch of enactment and [make] definite that the markets are truly stabilized successful some markets."