The Standard Chartered Renminbi Globalization Index (RGI) rose to 2,089 in December, up 2% from the previous month on the back of cross-border renminbi payments and CNH FX. Renminbi deposits in Hong Kong rose to over CNY1 trillion, reflecting more favourable offshore interest rates versus onshore. However, offshore deposit growth outside of Hong Kong has been lacklustre, as liquidity drain under the capital account remains large. 

 

Standard Chartered sees the biggest RGI drivers in 2015 will be the continued emergence of new offshore centres and further policy liberalization by China, such as the expansion of Renminbi Qualified Foreign Institutional Investor (RQFII) quota, the Shanghai Hong Kong Stock Connect programme and onshore Free Trade Zones. The RGI is expected to reach 2,500 by end-2015, up 20% versus end-2014.  The offshore CNH market is expected to continue to expand despite lingering China slowdown and renminbi depreciation concerns.

 

According to SWIFT, renminbi became the 5th most used payment currency in December, overtaking the Australian dollar and the Canadian dollar, and could challenge the 4th placed yen in 2015. The currency, however, remains the 8th most used currency for international-only SWIFT flows. Renminbi-denominated cross-border SWIFT payments remained the top contributor to the RGI.

 

Direct KRW-CNY trading has gotten off to a strong start since its December 1 2014 launch.. The average trading volume reached US$880 million on a daily basis during the first month. In Taiwan, to the rise in the limit on issuance size for mainland Chinese financial institutions to CNY45 billion from CNY25 billion should give the Formosa bond market a boost in 2015.

 

Standard Chartered expects the USD-CNY fixing to gradually climb higher in the first half of 2015 as the US dollar advances. However, a resumption of appreciation in H2 is expected as the USD weakens and China benefits from strengthening growth domestically and globally. For 2015 as a whole, Standard Chartered sees mild appreciation. On dim sum bonds, primary issuance is likely to decline in 2015 for the first time since the market started in 2007 due to high CNH funding costs, low G3 currency yields, lower redemptions, and improving conditions in China’s onshore bond market. Standard Chartered forecasts gross issuance at CNY480 billion – CNY 500 billion versus CNY564 billion in 2014.