RGI dips in April for first time since 2012
(10 June 2015 – Asia) There was a slight dip in Standard Chartered’s Renminbi (RMB) Globalisation Index in April, the first since October 2012.
The RGI fell 0.8 percent month-on-month, to 2154 from a revised 2171 in March.
Foreign exchange (FX) turnover remained the biggest index contributor in April, adding 0.8ppt to the month-on-month change, but was still lower than March’s 2.5ppt.
In its statement about the Index, Standard Chartered said a more stable CNY exchange rate since the start of April had caused FX turnover to ease back to lower levels; however, the benefits of a steadier CNY did not yet feed through to the RGI sub-components for deposits and Dim Sum bonds in April.
Trade settlement and Dim Sum bonds outstanding contributed -0.34ppt and -1.24ppt, respectively, to the month-on-month change, resulting in an overall drop of 0.8 percent month-on-month.
April was the ninth consecutive month that Dim Sum bonds subtracted from the headline RGI reading.
“Looking ahead, however, we expect offshore deposits to receive a boost from increased southbound flows via the Shanghai-Hong Kong Stock Connect programme in the coming months.
“We think Renminbi deposits in Taiwan are on track to reach CNY400 billion (A$83.7 billion) by end 2015, up from CNY302.3 billion in 2014,” the release said.
Across the board weakening in cross-border payments was possibly a delayed result of CNY volatility in Q1.
“We expect the RGI to start rising soon given much improved sentiment towards the CNY and a wave of recent policy liberalisation steps.”
Standard Chartered believes the impending launch of the Mutual Recognition of Funds (MRF) scheme in July, and the Qualified Domestic Individual Investors (QDII2) programme possibly in the second half of 2015, should further boost RMB usage.
The People’s Bank of China (PBoC) also recently granted offshore RMB clearing banks and other participating banks access to the onshore repo market.
“We expect these supportive policy measures to boost two-way cross-border flows and offshore liquidity.
“They also underscore Beijing’s commitment to faster capital account opening.
“This would strengthen the case for including the RMB in the IMF’s Special Drawing Rights (SDR) currency basket, which would foster further internationalisation.
“We see a 60 percent chance of SDR inclusion this year. Amid the SDR review, China’s capital account liberalisation is likely to accelerate sharply.
“SDR inclusion in 2015 would likely have a significant market impact, driving an immediate sharp increase in global diversification into RMB assets.
“It would likely alleviate pressure on the FX market and provide a strong boost to the Dim Sum bond market,” Standard Chartered concluded.
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