Plan for yuan trades on Stock Connect enters the next stage

A feasibility study on allowing stocks traded via the Southbound Stock Connect to be denominated in yuan has been completed, Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said at a LegCo meeting.

Hui said via video yesterday that the local authorities will hold discussions with mainland regulators on further arrangements.

Hong Kong Exchanges and Clearing (0388) will engage the industry and the government is prepared to provide supporting measures such as waving the stamp duty on transactions to enhance the liquidity of yuan-denominated stocks and facilitate trading, Hui added.

Hong Kong has been officially considering an expansion of trading in stocks denominated in yuan since last year when Chief Executive Carrie Lam Cheng Yuet-ngor said in her annual policy address in October that the city was looking at expanding channels for yuan flows from mainland China, including allowing trading of yuan-denominated stocks via an established link to markets in Shenzhen and Shanghai.

Getting more yuan-denominated shares in Hong Kong would eliminate currency risk for mainland investors, and potentially boost trading volumes for the city's stock exchange.

In its 14th Five-Year Plan revealed last March, China vowed to increase international use of its currency through a prudent, market-driven approach.

Hui also reiterated that the government will issue HK$15 billion of inflation-linked bonds and HK$35 billion of Silver bonds this year, first announced in the budget speech by Financial Secretary Paul Chan Mo-po in February.

On Sunday, Chan said the city will relaunch its inaugural retail green bond this month as the coronavirus pandemic eases to raise as much as HK$20 billion.

Hong Kong last month delayed a sale worth HK$6 billion because of the rapid spread of Covid-19.

The three-year green bond issue, which includes a quota from the new financial year that started in April, will be worth HK$15 billion, and it can be increased to up to HK$20 billion upon over-subscription, Chan said in a blog post.

The bond will have a rate of 2.5 percent, up from 2 percent for the planned sale in March, and will be open for subscription by the end of this month.