New rules to pit forex dealers with banks

2014-11-13

Hong Kong's banks welcomed the lifting of the daily yuan conversion cap, saying they will consider rolling out products and services targeting the currency, but money changers see it as a threat.

The Hong Kong Association of Banks said the step will allow the local financial industry greater flexibility in product design, so as to meet customers' needs for yuan investment and financial management services.

It said the SAR's position as an offshore yuan hub will be strengthened, and the currency's internationalization will receive a boost.

Hong Kong has around one trillion yuan in its banking system, over 80 percent of it being in time deposits.

Bank of China (Hong Kong) said customers will, from Monday, be able to make conversions between yuan and other currencies rather than just the Hong Kong dollar using the offshore rate, or CNH, through the lender's "multiple service channels." That include its branch network, internet banking and mobile banking.

The bank will also provide A-share margin trading as well as yuan mortgage and personal loan services.

Standard Chartered chief executive for greater China Benjamin Hung Pi-cheng said lenders in the SAR have prepared their systems for the policy change.

Good news for banks may prove otherwise for money changers. "We'll be fighting with banks for business after the relaxation [of the conversion]," Mr Ng, head of a local exchange, said.

Chan Yan-chong, a Hong Kong-based investment expert who bought millions of yuan from 2006 to 2010, said he had a lot of trouble making conversions every day. "I ran out of patience as the yuan kept appreciating."

"If you buy the currency to invest in the A-share market, it will be more convenient to do it at a bank," said Law Ka- chung, chief economist at Bank of Communications. "But I would still go to a money changer if I use yuan for traveling", he said. "Their rates is better."

Source: The Standard