The yuan markets have been integrated into 87 percent of institutional investors' portfolios, a recent HSBC survey found, highlighting Hong Kong's offshore ecosystem and market links that facilitate large-scale yuan use.
Based on responses from more than 120 institutional investors across Asia Pacific, the survey found that 63 percent of respondents most commonly selected offshore yuan markets, followed by 54 percent choosing Connect Schemes, such as Bond Connect and Stock Connect.
With yuan adoption becoming more portfolio-led than tactical, 66 percent cited diversification as the main reason for allocating to yuan assets. China's role in global trade and investment and yield opportunities were also identified as key drivers.
As Hong Kong plans to launch Five-Year China Government Bond Futures in August amid rising demand for yuan fixed income, nearly a third of respondents see government bonds as the top yuan asset class, surpassing 24 percent in A-share equities and 14 percent in corporate bonds.
Cheuk Wong, head of macro trading, Asia, and head of markets and securities services, Hong Kong, HSBC, said the yuan market now enables investors to operate seamlessly at scale, deepening the offshore yuan liquidity pool and expanding Connect schemes to improve liquidity access, investment, and risk management.
Looking ahead, three in four institutional investors expect their yuan usage for investment purposes to increase over the next 12 to 24 months, followed by 71 percent for hedging, 62 percent for settlement, 56 percent for cash management, and 52 percent for financing. A majority of respondents also cited the China-ASEAN and Asia-Middle East corridors as having the strongest growth in yuan-linked capital flows
