Renminbi Globalisation Index continues slow uptrend through July

The Standard Chartered Renminbi Globalisation Index, or the RGI, reached 1,911 in July, up 0.85% from the previous month and 69% year-on-year. Lacklustre index growth was a result of mild detraction of FX turnover and Renminbi deposits, which partly offset a rise in cross-border Renminbi payments.

Download our report: Offshore Renminbi – Slow but steady (pdf)

Hong Kong remained as the leader for offshore Renminbi payments, followed by London and Singapore. Cross-border Renminbi payments rebounded slightly in July, but the Renminbi’s share of China trade dropped. We do expect Renminbi trade settlement and its share of China total trade to eventually rebound in Q4, on the back of rekindling market confidence in the Renminbi. The Bank retains its year-end USD/CNY forecast of 6.09.

Contribution of offshore Renminbi deposits to the increase in the index was the smallest in 21 months as deposit growth remained muted. There could be more headwinds for offshore Renminbi accumulation in the coming months. CNH liquidity could stay on the tight side as new and expanded cross-border Renminbi remittance channels, such as Shanghai-Hong Kong Stock Connect, two-way sweeping programmes and cross-border loans, could favour net outflows in the near-term. The Bank revised down Hong Kong’s end-2014 Renminbi deposit to CNY980bn from its original forecast of CNY1.15-1.20tn. However, offshore deposits in other emerging centres, especially Taiwan and South Korea, are likely to grow strongly.

Dim Sum bond primary issuance slid to their lowest this year to just CNY14bn in August, including Certificate of Deposits of CNY8bn and bonds of CNY6bn, bringing gross issuance to CNY426bn, or 114% of 2013’s total. Although primary issuance could pick up in September after the summer lull, the second half will remain subdued in general. The Bank expects second-half primary issuance to slow to a monthly average of CNY30-35bn from CNY62bn in the first half, on the back of higher swap rates, improving onshore financing conditions and low USD funding costs. Standard Chartered maintains full-year Dim Sum issuance forecasts at CNY550-580bn.

Standard Chartered launched the RGI in November 2012. The Index covered five markets in offshore RMB business: Hong Kong, London, Singapore, Taipei and New York. It measures business growth in four key areas: deposits (denoting store of wealth), Dim Sum bonds and Certificate of Deposits (as vehicles for capital raising), trade settlement and other international payments (unit of international commerce) and foreign exchange (unit of exchange). As the Renminbi further internationalises, there is capacity to include additional parameters and markets.

Standard Chartered Renminbi Globalisation Index

For further information, please contact:

Gabrial Kwan
Corporate Affairs, Hong Kong
+852 2820 3036
Gabriel.Kwan@sc.com