Bloomberg News

Hong Kong Yuan Deposits Rise Most Slowly in 3 Months

October 31, 2011

(Corrects quote in fifth paragraph in story originally published yesterday.)

Oct. 31 (Bloomberg) -- Hong Kong’s yuan deposits grew at the slowest pace in three months as expectations for appreciation weakened and outflows from the mainland slowed.

Savings denominated in the Chinese currency rose 2.2 percent to 622.2 billion yuan ($98 billion) at the end of September from August, according to a statement from the Hong Kong Monetary Authority.

“Demand for the yuan has dropped as fewer investors see it as an attractive investment vehicle,” said Nathan Chow, an economist at DBS Bank (Hong Kong) Ltd. “Chinese exporters’ increasing use of the yuan for trade settlement also drew some currency back to China from Hong Kong.”

In Hong Kong’s offshore market, the yuan declined 0.2 percent to 6.3902 per dollar today, paring the currency’s advance this month to 1.6 percent. Twelve-month non-deliverable forwards advanced 0.9 percent in October to 6.3625 in Hong Kong, according to data compiled by Bloomberg. The contracts fell 0.1 percent today.

"Yuan deposit growth in Hong Kong is likely to remain sluggish in the near term as expectations for appreciation will take some time to recover," Chow said He estimates deposits could rise to 700 billion yuan to 750 billion yuan by the end of the year.

Yuan deposits in the city have jumped more than 10-fold in the past two years from 58.2 billion yuan in September 2009, according to data from the authority, the city’s de-facto central bank.

On a year-on-year basis, deposits in September jumped 317 percent, the smallest gain since October 2010, HKMA data show.

--Editor: Nerys Avery

%CNY %USD HKMA HK <Equity>

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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