The Hong Kong Stock Exchange (HKEX) announced that it plans to launch the “HKD-RMB Dual counter model” and the “Dual counter banker Mechanism” in the Hong Kong stock market on June 19. The first 24 shares included in the list will be able to be traded in either Hong Kong dollars or RMB, facilitating a more efficient flow of offshore RMB in international markets.
“The launch of the dual-counter model is another important milestone in the development of Hong Kong’s capital markets, which will not only provide issuers and investors with more trading options, but also enrich the RMB product ecosystem, solidify Hong Kong’s position as the world’s largest offshore RMB center, and further promote the internationalization of the RMB,” said Ouguanshen, chief executive officer of HKEX.
Lin Dahui, a senior investment analyst, said in an interview with International Business Daily that the main role of mainland Hong Kong stock companies in adding RMB counters is to reduce the exchange exposure of mainland investment in Hong Kong stocks and the resulting net worth fluctuations, provide help for market liquidity, and bring more convenience to listed companies. The function is to expand the scope of financial products denominated in RMB and prepare for promoting the internationalization of RMB.
Interested participants can apply to become dual-counter banker of eligible securities under the relevant rules, HKEx said. Dual-counter banker will provide bid-sell bilateral quotes for yuan-denominated shares of these securities, thereby providing liquidity to the yuan counter and collecting the price difference between the two counters.
It is understood that the two-counter model mainly refers to such a transaction process:
First of all, eligible securities must enter the Hong Kong Stock Connect.
Second, the shares of the same listed company can be denominated in Hong Kong dollars or RMB, and investors can choose to buy them with either Hong Kong dollars or RMB.
Third, select qualified securities firms to support dual-currency counter trading. Generally speaking, securities makers and licensed securities firms are collectively referred to as “banker” in Hong Kong, and must obtain corresponding qualifications, such as securities makers must be at least recognized by the Hong Kong Stock Exchange, or have a rating above A3 Moody’s, or the company’s paid-in capital is at least HK $50 million equivalent and shareholders’ investment is at least HK $100 million equivalent.
Fourth, liquidation. The settlement time between dual currency counters is T+2.
This trading process, banker activity and settlement mode is called the two-counter mode.