Offshore Market Challenges RMB Exchange Rate Pricing Power

With the acceleration of RMB internationalization process, the importance of RMB in the currency derivatives is also rising.

Yesterday, the Singapore Stock Exchange first tried a new RMB futures contract and was touted on the first day of its listing.

Prior to that, China's Hongkong exchanges and Chicago exchanges have also seen opportunities for Renminbi derivatives, and have launched derivatives in Renminbi.

However, China's mainland financial market is still short of RMB foreign exchange derivatives.

Analysts have pointed out that offshore foreign exchange markets such as China and Hongkong have begun to challenge the pricing power of the RMB exchange rate.

Compared with other derivatives, the RMB currency futures are mainly designed to facilitate investors and institutions to better manage the RMB exchange rate risk, especially the mainland enterprises face greater exchange rate risk.

In the first half of this year, 703 listed companies suffered exchange losses, amounting to 11 billion 672 million yuan.

Opportunities for Renminbi derivatives

Hu Xiaolian, vice president of the central bank, recently said that with the expansion of the RMB's "going out" scale, the interest of the international financial market and financial center became increasingly strong, and began to regard the RMB business and products as new opportunities for their own market to develop and consolidate their financial centers.

It is understood that Singapore Exchange has added Renminbi (US dollars / offshore RMB, RMB / US dollar), Japanese yen (US dollar / yen) and Thai baht (Thai baht / US dollar) products to its new Asian foreign exchange futures contract to further enrich its foreign exchange portfolio, which has been trading since October 20th of this year. Bank of China has become the first market maker of RMB futures in Singapore Exchange.

Myth Boko, chief executive of the new exchange, believes that the introduction of the RMB futures of Singapore Exchange has expanded the scope of the Renminbi denominated investment products in Singapore and will further promote the expansion and utilization of the RMB deposit pool in Singapore.

In addition, according to the reporter's understanding, to facilitate the settlement efficiency of RMB valuation products, the Singapore Exchange will add Renminbi cash collateral to its mortgage margin list (G5 currency), which enables the RMB to be used in all unliquidated positions maintained by the New Stock Exchange Clearing Company Limited, and further promotes the use of RMB in liquidity and mortgage management activities.

In fact, as one of the offshore RMB markets in Asia, Singapore is not the first market to launch RMB foreign exchange futures.

As early as 2012, the Hong Kong stock exchange of China has launched RMB currency futures, and the Hong Kong Stock Exchange's RMB currency futures traded on September 2012. It is also the world's first convertible RMB currency futures, with a contract value of $100 thousand per contract and a margin of about 8000 yuan per contract.

In April 7th this year, HKEx increased the trading after the closing of the yuan Futures (that is "night trading").

According to the HKEx data, in the first 9 months of this year, its RMB currency futures volume was 151700 contracts, up 54% from the 11580 contracts in September before last year.

In September 2012, the HKEx launched RMB futures for half a year. In February 25, 2013, the Chicago Mercantile Exchange Group (CME group) officially started trading and delivered offshore RMB futures. Its RMB futures varieties could be divided into two contracts: Standard futures contracts and electronic Mini futures contracts, the contract sizes were 100 thousand US dollars and 10 thousand US dollars respectively, and the two contracts were RMB in Hongkong physical delivery.

Mainland urgently needs RMB foreign exchange futures

Analysts believe that the scale of cross-border payment and settlement of RMB is gradually increasing, and at the same time, the two-way fluctuation of RMB has also been increased. For enterprises, exchange rate volatility will inevitably bring about risk aversion.

The central bank data show that the cross-border RMB settlement amount in 2009 was only 3 billion 580 million yuan, and it exceeded 4 trillion and 800 billion yuan in the first three quarters of this year.

The RMB has become the second largest cross-border payment currency in China. The proportion of RMB cross-border income and expenditure accounts for nearly 25% of the total cross-border income and expenditure of foreign currencies. The proportion of RMB settlement in trade in goods imports and exports exceeds 15%.

Mainland Finance

There is only one interest rate futures product and a stock index futures product, which are 5 year Treasury futures and Shanghai and Shenzhen 300 stock index futures, and no exchange rate futures products.

Previously, the new "

"In the" futures market construction ", it is clearly pointed out that in line with the reform of interest rate marketization and RMB exchange rate formation mechanism, it is necessary to develop financial derivatives in a stable and orderly way to meet the needs of capital market risk management.

China Financial Futures Exchange (hereinafter referred to as "CICC") has also announced that it will launch the simulation of Euro dollar, Australian dollar to us dollar futures in October 29th.

According to the reporter, the euro is a mature foreign currency futures for us dollar, Australian dollar and US dollar.

According to CICC, China's real economy faces both the risk of RMB exchange rate fluctuations and the risk of the euro against the US dollar and Australian dollar against the US dollar.

Listed cross exchange rate futures are conducive to avoiding risk of non RMB exchange rate fluctuations, stabilizing enterprise input and output expectations, promoting stable growth of trade, and also conducive to meeting residents' demand for foreign exchange investment.

In fact,

Foreign exchange derivatives have been included in the future development plan of CICC.

CICC is actively promoting a variety of financial derivatives, including equity, interest rate and foreign exchange.

Zhang Shenfeng, chairman of CICC, has said that in terms of exchange rate products, CICC will seize the opportunities of market-oriented reform of RMB exchange rate, RMB capital account convertibility process and the opportunities of Shanghai Free Trade Zone, and timely launch cross futures exchange rate futures and RMB foreign exchange rate futures and futures rights. Finally, the three complete product lines, such as equity, interest rate, foreign exchange futures and options, will be established.