Singapore Inks Direct Currency Trade, RQFII Quota With China

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Singapore and China will introduce direct trading between their currencies, helping the city-state compete with Hong Kong and London as an offshore yuan hub.

The two nations also agreed on a 50 billion yuan ($8.2 billion) quota for financial institutions in Singapore to invest in China’s domestic securities under the Renminbi Qualified Foreign Institutional Investor, the Monetary Authority of Singapore said in a statement today. The Southeast Asian nation will be one of several locations where Chinese institutional investors will be able to buy securities overseas with yuan under the new Renminbi Qualified Domestic Institutional Investor program, according to the statement.

“The ongoing internationalization of the renminbi continues to accelerate,” said Loh Boon Chye, Singapore-based deputy president for Asia Pacific at Bank of America Merrill Lynch. “Today’s announcement is the next stage in Singapore’s efforts to play a prominent role in the long-term development of this market.” Loh is also the chairman of the capital markets, fx & derivatives working group assisting the monetary authority.

The announcement comes a week after China approved direct trading between the yuan and the British pound, helping establish London as the European hub for its currency. Asia’s largest economy is seeking a greater role for the yuan in global trade and investment, and has allowed the currency to trade offshore in Hong Kong since 2010. The city holds the world’s largest offshore yuan savings pool and handles more than 80 percent of Chinese trade that’s denominated in yuan.

’Chinese Wealth’

China started the RQFII program in 2011 in Hong Kong, allowing investors holdings the currency offshore to buy domestic bonds, stocks and money-market instruments. Regulators said in July they would expand it beyond Hong Kong and Taiwan to the U.K. and Singapore. London won an 80 billion yuan RQFII quota last week, while the pound will join the greenback, Japanese yen and Australia’s dollar as a major currency that can be exchanged directly for yuan.

The People’s Bank of China said in January that it has started preparations for the so-called QDII2, which will enable individuals to invest in overseas capital markets. The QDII program, which began in 2006, only lets investors buy securities outside of the country through asset managers and funds, and is denominated in foreign currency.

“The high profile announcement of the RQDII scheme distinguishes Singapore from other recent deals,” Australia & New Zealand Banking Group Ltd. (ANZ) economists led by Liu Li-Gang wrote in a note today. “It will allow Singapore to capture the outbound flow of Chinese wealth.”

Reform Agenda

Singapore doubled a currency swap with China to 300 billion yuan in March, and started yuan clearing services in May. HSBC Holdings Plc and Standard Chartered Plc sold the city-state’s first Dim Sum bonds in the same month. Yuan deposits in Singapore totaled more than 140 billion yuan at the end of July, China’s official Xinhua News Agency reported Sept. 20, citing Leong Sing Chiong, assistant managing director of the MAS.

Further details on direct currency trading will be announced separately, while new measures are being studied to allow cross-border flows of yuan between Singapore and China’s Suzhou Industrial Park as well as Tianjin Eco-City, the MAS said in today’s statement.

The yuan was little changed today at 6.0923 versus the greenback as of 4:15 p.m. in Shanghai, after falling as much as 0.05 percent earlier. The Chinese currency traded at 4.912 per Singapore dollar, according to data compiled by Bloomberg.

“In recent months, despite the volatility in markets at times, the authorities have committed to rolling out renminbi reform agenda,” Paul Mackel, Hong Kong-based head of Asian currency research at HSBC said in an e-mail interview today. “The longer-term implications from such measures will expand yuan usage to more of an investment-oriented currency.”

Singapore Inks Direct Currency Trade, RQFII Quota With China - Bloomberg

 

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Financial Times - China is to further internationalise its currency by allowing Singapore-based investors to buy renminbi-denominated securities, paving the way for direct trading between the two country’s currencies.

The accord follows last week’s announcement from George Osborne, Britain’s chancellor – or finance minister – who touted a similar agreement as a breakthrough for London as a global hub for renminbi trading.

The deals highlight how China has been carefully handling the granting of trading privileges to financial centres jostling to win status as offshore renminbi hubs as use of the Chinese currency outside the country grows.

In the latest agreement, China will extend its so-called renminbi qualified foreign institutional investors (RFQII) programme to Singapore, allowing Singapore-based banks and asset managers a quota of Rmb50bn ($8.2bn) to invest in Chinese securities, the Monetary Authority of Singapore said.

Under a similar arrangement struck last week with Britain, that quota was set at Rmb80bn for financial institutions based in Britain. Hong Kong is the only territory with an existing RFQII arrangement.

Under RQFII, those holding renminbi offshore are able to invest directly in mainland Chinese assets – from stocks to bonds to money market funds. By widening the investment options for renminbi sitting outside China, the system is partly designed to encourage the use of the currency for trade settlement.

It also helps to increase foreign participation in China’s domestic markets, something the authorities have been keen to do in an attempt to attract more long-term investment.

For Singapore, a tiny island nation of only 5.3m people, the agreement with China marks another significant step in building itself up as the renminbi hub for southeast Asia.

One of China’s biggest state-owned banks, Industrial & Commercial Bank of China, in May started clearing services for renminbi transactions in Singapore.

In September, Singapore overtook Japan as Asia’s biggest foreign exchange centre for the first time, making it the third-largest such hub in the world after London and New York.

Currency strategists say that Singapore is not likely to rival Hong Kong as an offshore renminbi centre, and is seen as a future renminbi hub for business done in the Chinese currency across the Association of Southeast Asian Nations.

“Singapore is a significant foreign exchange hub, meaning the market structure is already in place, and its position as a regional manufacturing and trading centre will ensure there is real and growing demand around renminbi,” said Loh Boon Chye, deputy president for Asia Pacific at Bank of America Merrill Lynch in Singapore.

However, use of the currency for trade settlement generally has failed to keep pace with trading.

While the renminbi was the eighth most popular trading currency in August this year – the most recent month for which figures are available – it was only the 12th most used payments currency, according to Swift, the payments system.

The MAS said Singapore would also be “given consideration” as one of the investment destinations under a separate “renminbi qualified domestic institutional investor” scheme. This would allow Chinese investors to use the renminbi to invest in Singapore’s capital markets.

In addition SGX, the Singapore exchange, and the Shanghai Futures Exchange signed an initial agreement to jointly develop commodity derivatives.

 

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Associated Press — China and Singapore have agreed to allow direct trading between each other's currency, Singapore's central bank said Tuesday.

The move, along with other agreements on financial cooperation, is expected to bolster Singapore's status as a leading offshore trading centre for the Chinese yuan, officially called the renminbi(RMB).

"China and Singapore will introduce direct currency trading between the Chinese yuan and Singapore dollar," the Monetary Authority of Singapore (MAS) said in a statement, adding that details will be announced separately.

The statement was issued after a meeting between senior officials from both countries led by Singapore Deputy Prime Minister Teo Chee Hean and visiting Chinese Vice Premier Zhang Gaoli.

China will also grant Singapore-based investors a 50 billion yuan ($8.2 billion) investment quota under its Renminbi Qualified Foreign Institutional Investor programme, MAS said.

This would allow investors based in the city-state to use the yuan to invest in Chinese stocks and bonds.

The programme "will help to diversify the base of investors in China's capital markets and promote adoption of the RMB for investment", MAS said.

Chinese institutional investors will also be allowed to use the yuan to invest in Singapore's capital markets.

"The new initiatives will further promote the international use of the renminbi through Singapore," the MAS said.

Its managing director Ravi Menon added: "Financial ties between the two countries have deepened considerably and Singapore is well placed to promote greater use of the RMB in international trade and investment in the years to come."

China's rise as the world's second biggest economy has seen the yuan take on a bigger role in international financial markets.

Britain last week said that direct trading between the yuan and the British pound will be allowed.

China also has similar direct trading arrangements for the yuan with the US dollar, the Japanese yen and the Australian Dollar.

 

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China and Singapore agreed on Tuesday to extend the Renminbi Qualified Foreign Institutional Investor (RQFII) program to Singapore, with an aggregate quota of 50 billion yuan (8.2 billion U.S. dollars), their central banks announced here.

The pilot program is one of the initiatives agreed upon by the two countries at a meeting co-chaired by Chinese Vice Premeir Zhang Gaoli and Singapore's Deputy Prime Minister Teo Chee Hean.

The RQFII program "will allow qualified Singapore-based institutional investors to channel offshore RMB from Singapore into China's securities markets," the Monetary Authority of Singapore said.

China has been gradually loosening its capital controls to move towards a freely convertible yuan.

The Monetary Authority of Singapore said the RQFII license holders may also issue RMB investment products to investors in Singapore, using the RQFII quota.

In the opposite direction, the two sides also agreed to launch the pilot scheme of Renminbi Qualified Domestic Institutional Investor (RQDII) in Singapore "when it is the right time," the People's Bank of China said in a statement.

The scheme will allow qualified Chinese institutional investors to use RMB to invest in Singapore's capital markets.

Hu Xiaolian, deputy governor of the Chinese central bank, is a member of the Chinese delegation led by Vice Premier Zhang Gaoli to the 10th Joint Council for Bilateral Cooperation (JCBC) meeting in Singapore on Tuesday.

Financial services is one of the sectors where the two sides agreed to work together to boost their bilateral cooperation on Tuesday.

They also agreed to introduce direct currency trading between the Yuan and the Singapore Dollar, with further details expected to be announced separately.

The Suzhou Industrial Park and the Tianjin Eco-City, two flagship cooperation projects led by the Chinese and Singapore governments, will also play a role in China's push for RMB internationalization. China will offer support to the two parks to try out innovative ideas in the cross-border RMB operations.

The two sides will also strengthen their cooperation in the banking sector and its regulation, including boosting the coordination efforts in terms of international financial regulation.

The People's Bank of China said authorities of the two countries will also boost their cooperation and dialogues in the development and regulation of the futures and derivatives market.

Support will be given to the exchanges of the two countries to boost their cooperation. The two sides also agreed to establish mechanisms to facilitate the listing of Chinese enterprises in Singapore, it said.

The Monetary Authority said that the new initiatives build on agreements concluded earlier.

Singapore has been pursuing a role as one of the offshore RMB centers. The local units of the Bank of China and the Industrial and Commercial Bank of China have both been offering yuan-clearing services in Singapore. The RMB deposits in Singapore's banking system exceeded 140 billion yuan (23 billion U.S. dollars) at the end of July, according to the Monetary Authority.

"Financial ties between the two countries have deepened considerably and Singapore is well placed to promote greater use of the RMB in international trade and investment in the years to come," the Monetary Authority quoted its managing director Ravi Menon as saying on Tuesday.

China to extend RQFII program to Singapore - China.org.cn

 

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US dollar.
Japanese Yen.
Australian Dollar.
British Pound.
Singapore Dollar.

That's 5 currencies that is now directly trading with the Renminbi.

Next we need to concentrate on direct trading with the Euro, Korean Won, Canadian Dollar, Swiss Franc, Russian Rouble, Brazilian Real, Indonesian Rupiah, Malaysian Ringgit.

 

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China's plan is to have 10 such currency trading centres around the world，including one in Africa。

 

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China's plan is to have 10 such currency trading centres around the world，including one in Africa。

Where did you get the figure 10?