HONG KONG (Reuters) – Hong Kong will launch a new yuan-denominated trade finance program and expand the hours and scope of its Bond Connect program for investors in mainland China, Hong Kong Monetary Authority Chief Executive Eddie Yue said on Monday.
The announcement came along with other announcements made by Chinese central bank Governor Pan Gongsheng at a business conference, including pledges to help Hong Kong provide cheap yuan financing in the territory and measures to support the yuan, which is expected to the lowest level in 16 months has fallen.
Beijing will support Hong Kong in launching the trade finance program, using 100 billion yuan ($13.64 billion) in currency swaps for one, three and six months, Yue, head of Hong Kong’s de facto central bank, told reporters on the sidelines of Asia. Financial Forum in Hong Kong.
The two central banks have a currency swap agreement totaling 800 billion yuan.
Under the new facility, banks can exchange their Hong Kong dollars for yuan financing at the HKMA at interest rates linked to domestic rates, providing Hong Kong banks with a stable source of relatively cheaper yuan funds, Yue said.
Yue said the settlement deadline for the Bond Connect program will be extended to 4:30 PM (08:30 GMT) and expanded to include US dollar and euro bonds, in addition to yuan bonds.
The HKMA will also promote yuan repurchase agreements, allowing international investors to use local bonds as collateral for yuan funds in Hong Kong from Feb 10, he said.
($1 = 7.3316 renminbi)
