Bloomberg News

Standard Chartered Says Hong Kong Yuan Loans May Surge Fivefold

December 13, 2011

Dec. 14 (Bloomberg) -- Yuan-denominated lending in Hong Kong may jump fivefold to 100 billion yuan ($16 billion) next year because of tighter funding in other currencies, Standard Chartered Plc said.

Commodities companies and medium-sized Hong Kong manufacturers are among those that need yuan-denominated financing, Benjamin Hung, the bank’s chief executive officer for Hong Kong, said in an interview yesterday.

Availability of Hong Kong dollars for lending has tightened, with banks’ loan-to-deposit ratio in the currency rising to 85 percent at the end of October, from 74 percent a year earlier, according to the Hong Kong Monetary Authority. Chinese Vice Premier Li Keqiang pledged in August to bolster Hong Kong’s position as a center for the offshore yuan trade.

“If one currency is tight, people will tend to borrow in another currency,” Hung said. “That is why we see a very good increase in demand for yuan loans. That is a good alternative.”

Outstanding yuan loans in the city reached 19 billion yuan as of the end of September, according to the city’s de facto central bank. Asked whether loans could reach 100 billion yuan in 2012, Hung said it “shouldn’t be difficult” given demand from companies and financial institutions.

The development of yuan lending has been lagging behind that of yuan-denominated bonds. Sales of Dim Sum bonds, securities denominated in the currency, have more than tripled this year to about 148 billion yuan, according to Bloomberg data.

Yuan lending started to pick up in the second half of this year as companies began to take advantage of the city’s foreign exchange market, Hung said.

“Companies can borrow RMB and easily swap to U.S. dollars or whatever currency they need,” Hung said, using the Chinese abbreviation for the currency. “This makes RMB more usable and lendable,” he said.

--Editors: Nathaniel Espino, Tan Hwee Ann

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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