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Expected U.S. interest rate cuts, the Hong Kong government’s bid to attract family offices and future investment migration plans will attract investors to renminbi-denominated assets this year, according to a Standard Chartered Bank executive.
The lender, one of three note-issuing banks in the city, said the Federal Reserve will begin cutting interest rates by 75 basis points starting in the second half of this year, making U.S. dollar assets less attractive and forcing funds to move to Asia. I believe I will return. said John Tan, managing director and head of financial markets for Hong Kong, Taiwan and the Greater Bay Area.
“These trends will support Asian capital markets and currencies,” Tan said at a briefing on Wednesday. “It also means that RMB-denominated deposits, stocks, bonds and other investment products will become more attractive this year.”
Tan expects U.S. interest rate cuts to support the yuan, which will appreciate by about 2% to 7 yuan to the dollar this year. The yuan, currently trading at around 7.18 yuan, has fallen more than 13% since March 2022, when the U.S. began raising interest rates in the latest interest rate cycle.
The Fed raised interest rates by 525 basis points in the 17 months ending in July of last year to encourage inflows into U.S. dollar assets. The DXY index, which measures the dollar’s movement against a basket of major currencies, has risen 14% since March 2022, reaching 113.29 in October 2023, the highest level in 20 years. It currently stands at 102.51, down 10% from its peak due to rising expectations for interest rate cuts from the fourth quarter onwards.
“The tide will turn this year,” Mr Tan said. “In recent months, more and more investors have shown interest in RMB investment products.”
Yuan depreciation sends Hong Kong bank interest rates, insurance and US dollar safety soaring
Yuan depreciation sends Hong Kong bank interest rates, insurance and US dollar safety soaring
He said Standard Chartered offers financial products in mainland China and Hong Kong to meet customers’ growing demand for renminbi-related investments.
Mr Tan said the Hong Kong government’s efforts to attract wealthy individuals from the Greater Bay Area, Southeast Asia and the Middle East to open family offices will also influx capital and create demand for renminbi products.
Hong Kong has offered various incentives to family offices since hosting the Wealth Summit in March 2023. This was followed by tax cuts in May and the launch of an investment migration plan to attract family offices in December.
These efforts come after CEO John Lee Kaciu set a goal of attracting at least 200 family offices by 2025, in addition to the approximately 400 already here. I was disappointed.
The new Capital Investment Entrant Scheme, announced on December 20, is better known as the Investment Migration Scheme and involves investing at least HK$30 million (US$3.84 million) in stocks, bonds or other assets, excluding housing. Providing people with a faster route to residency. property.
“Family offices and investment migration plans will expand the liquidity pool to invest in dim sum bonds and other renminbi assets traded in Hong Kong,” Tan said.
He said the Connect scheme, which enables cross-border trading of wealth management products, stocks, bonds and interest rate swaps, will continue to support the development of RMB products and solidify the city’s position as the largest offshore RMB trading center. He said he would make it happen.
Another driving force for Hong Kong’s investment market this year will be green finance, Tan said, noting that many companies are keen to add green elements to their financing activities.
Standard Chartered said it plans to help customers issue and invest in green bonds and loans, with the proceeds going towards projects that reduce carbon emissions and pollution.
“Demand for green bonds and green loans has been on the rise in recent years, and this trend is likely to continue this year,” Mr Tan said.
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