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HKEX CEO: New Dual Counter Scheme Strengthens Hong Kong's Role as Major Yuan Trading Hub

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Investors Can Now Trade Hong Kong Stocks in Yuan and Hong Kong Dollar in Dual Counter Scheme

New Dual Counter Model Launched in Hong Kong

Investors in Hong Kong can now trade selected Hong Kong stocks in both yuan and Hong Kong dollar in the new "HKD-RMB Dual Counter Model" launched on Monday. As part of the scheme, 24 companies, including tech giants like Tencent, Alibaba, and Baidu, are offering yuan counters to Hong Kong investors. Securities listed in both Hong Kong dollar and Renminbi counters only are included in the dual counter model. All shares of the same securities in the two different trading counters will be "fully interchangeable between counters," according to the Hong Kong Exchange.

New Investment Options Available

Hong Kong Exchanges and Clearing CEO Nicolas Aguzin revealed in an exclusive interview with CNBC's "Squawk Box Asia" that the dual counter scheme aimed to offer investors more investment options and diversification opportunities. He said that the initial batch of 24 companies in the scheme made up 40% of the average daily trading volume in Hong Kong. The Hong Kong exchange anticipates that the majority of stocks in the market will eventually participate in the program.

Southbound Flow of Investments from the Mainland Simplified

Aguzin said that the main objective of the dual counter scheme is to simplify the southbound flow of investments from mainland China. He added that the new model would tap into a liquidity pool in Renminbi that could now invest directly. While no official date has been announced, the intention is that investments via Stock Connect will be able to access the dual counter model eventually.

Dual Counter Model Distinguished by "Market Maker Program"

The dual counter model is distinguished by the inclusion of the "Dual Counter Market Maker Program," with nine market makers signed up. The program aims to sustain liquidity to the yuan counter while minimizing price discrepancies between the Hong Kong dollar and yuan counters. Aguzin expects the program to maintain stability and encourage activity in both markets.

Investment flows from mainland China are likely to increase, especially from retail investors who represent a vast untapped market. The dual counter program will initially target investors holding offshore yuan but will eventually enable mainland investors to trade yuan stocks listed in Hong Kong using Onshore Yuan. The Hong Kong exchange previously launched a similar scheme called the "Dual Tranche, Dual Counter" model in 2012. However, only one company took it up, according to Bloomberg.
The new HKD-RMB Dual Counter Model launched in Hong Kong offers a new investment opportunity for businesses looking to tap into the Asian market. The inclusion of tech giants like Tencent and Alibaba highlights the growth potential of technological advancements and their impact on investment opportunities. With the program aimed at offering more investment options and diversification opportunities, businesses seeking to expand their presence in Asia can benefit from the increased liquidity and stability expected in both markets. The simplification of southbound investment flows from mainland China is especially relevant as businesses may now tap directly into the liquidity pool in Renminbi.

The Dual Counter Market Maker Program, designed to sustain liquidity while minimizing price discrepancies between the Hong Kong dollar and the yuan counters, encourages activity in both markets. The expected increase in investment flows from mainland China, currently an untapped market, should encourage businesses to take advantage of the program's initial targeting of investors holding offshore yuan. As the scheme expands, it will open the doors for mainland investors to trade yuan stocks listed in Hong Kong using onshore yuan. Overall, Hong Kong's new dual counter model is a positive development for businesses seeking to expand their operations in Asia.

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