HK Monetary Authority preparing access to China's bond and forex market

Hong Kong's de facto central bank is still preparing details on investing in China's interbank bond and foreign exchange markets, months after People's Bank of China opened the two markets for overseas central banks.

Norman Chan Tak-lam, chief executive of Hong Kong Monetary Authority, told China Daily on a Friday press briefing that the authority has not yet opened accounts with PBOC. Relevant preparation, including documentation, is still underway.

In an effort to internationalize the yuan and increase the availability of yuan-denominated assets, PBOC opened its mostly closed onshore interbank bond market to foreign central banks in July. In September, foreign central banks were allowed access to China's interbank foreign exchange market.

Commenting on whether Hong Kong's foreign-exchange reserves will increase its holding of renminbi-denominated assets after the currency was included in International Monetary Fund's reserve currency basket, Chan said HKMA will "gradually and orderly" increase the portion of renminbi-denominated assets.

"Our forex reserve has a 60 billion yuan quota in China's interbank bond market and a $2.5 billion quota under the Qualified Foreign Institutional Investors program. Both have been used up long before," he said. "We are considering buying more yuan assets. In the medium and long-term I'm optimistic on the yuan."

So far yuan assets only account for 1 percent of the reserve.

He also disclosed that by end-November yuan deposits in Hong Kong rarely changed from the level in October. The yuan pool dropped by 4.6 percent to 854.3 billion yuan as of the end of October, after a sharp fall of 8.5 per cent in September, following PBOC's exchange reform in August disrupted the yuan's one-way bet.