Hong Kong Exchanges and Clearing (HKEx) is to launch its first renminbi-denominated exchange-traded fund (ETF), the Hang Seng RMB Gold ETF, on 14 February.
The new Hang Seng RMB Gold ETF is a physical instrument, meaning it will represent holdings in actual gold. Since the fund is denominated in RMB, investors that wish to buy or sell units on the secondary market will only be able to use brokers that are eligible for trading and settling RMB securities. The Hang Seng Index (HSI) tracks the performance of the top 45 companies listed in the Hong Kong stock market.
ETFs are popular with investors as they offer a simple, easily-tradable product based on baskets of securities, enabling easy access to a particular market without stock picking. Asian bourses including the Tokyo Stock Exchange and the Thailand Stock Exchange have prioritised building up the number of ETFs available to trade on their respective platforms in the last 18 months.
The expansion and internationalisation of the RMB is a core plank of the Chinese government’s economic policy. In Q4 2011, regulatory authority the China Securities Regulatory Commission began allowing qualified foreign institutional investors (QFIIs) to invest up to 20 billion offshore RMB in domestic securities – a move intended to boost use of the currency. China’s State Administration of Foreign Exchange stated on 30 December 2011 that it had granted RMB 10.7 billion (US$1.58 billion) in renminbi qualified foreign institutional investor (RQFII) quotas so far, out of a planned RMB 20 billion (US$3.17 billion) in total.
Currently, Hong Kong is the world’s largest offshore RMB centre, followed by London. A recent agreement between the UK Treasury and the Hong Kong Monetary Authority (HKMA) formed a joint private sector forum that aims to support the development of the offshore RMB market.
HKEx is expected to begin trading volatility futures on 20 February, following the introduction of its HSI Volatility index last year. The exchange is also planning to offer after-hours futures trading from the second half of this year, subject to regulatory approval.