HSBC Holdings (0005)

[specuvestor]

No worries... I actually think only half of the FULL TIME finance + broking people actually understand how this works... I am the minority that beh paiseh keep asking until I know u make sense or you are bluffing, rather than act "professional" and nod head That's how I built up my knowledge base... By beh paiseh asking lots and trying to link up with reality

For a lay person Mr CityFarmer you know loads

[CityFarmer]

No worries... I actually think only half of the FULL TIME finance + broking people actually understand how this works... I am the minority that beh paiseh keep asking until I know u make sense or you are bluffing, rather than act "professional" and nod head That's how I built up my knowledge base... By beh paiseh asking lots and trying to link up with reality

For a lay person Mr CityFarmer you know loads

Thanks, asking question on doubt should not be taken as "paiseh", acting professional should be taken as "paiseh" IMO.

“知之为知之 不知为不知 是知也“ - just don't know how to translate, but the key point is the same as previous sentence.

[Boon]

Full RMB convertibility within five years looking increasingly likely, says HSBC

10 May 2013

Category: News, China, Global
By Hui Ching-hoo

HSBC is voicing increased confidence in its view that the RMB will likely become fully convertible within five years, after China’s State Council outlined nine key measures to deepen economic reforms on Monday (May 6). With this, the government body vowed to unveil an operational plan for RMB convertibility in 2013.

HSBC Co-Head of Asian Economic Research Qu Hongbin said in a report published on Wednesday (May 8) that the next step in the process of capital account liberalisation will be the expansion of existing QFII, QDII and RQFII programmes, alongside the opening up of individual cross-border investments.

“We expect things to change quickly as rules are now being relaxed for both the approval process for qualified institutional investors as well as for the products they can invest in,” he said. “Following the recent acceleration of QFII, RQFII, and QDII programmes, further growth and a greater variety of investment instruments can be expected in the near future.”

Capital account convertibility and RMB internationalisation will develop further as a number of Chinese cities, including Shanghai, Tianjin and Beijing, are preparing to launch pilot programmes that will allow their residents to invest abroad, said Mr. Qu. However, he notes that getting the onshore financial house in order is a precondition for full convertibility.

Before making the RMB convertible, China needs to liberalise interest rates and develop a fully functioning bond market. Interest rate liberalisation lies at the heart of China’s financial market reform and is crucial for the development of a fully functioning bond market. It is also one of the goals set out in the government’s 12th five-year plan.

Mr Qu said: “Beijing is already taking steps to speed up the process and we expect further development in the coming years.”

According to him, the next steps will likely include: (1) Further expanding the floating band for deposit rates and freeing up deposit rates; (2) Reducing the number of categories of lending rates currently under regulation from five to three and finally to only one – which will be the benchmark lending rate; cutting the number of categories of regulated deposit interest rates from seven to five or fewer; (3) The establishment of a deposit insurance scheme; and (4) Enhancing the Shanghai interbank offer rate (SHIBOR) as a pricing benchmark.”

When China’s domestic financial house is in order, China’s onshore markets will be ready to become more open to foreign investors, Mr. Qu claimed. In turn, this will pave the way for the RMB to gradually achieve capital account convertibility: “We are now more confident on our call that the redback will likely become fully convertible within five years,” he said.

http://www.asiaasset.com/news/News_HSBCRMBconvert.aspx

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China cabinet urges detailed yuan convertibility plan

May 6 (Reuters) - China's cabinet has called for the drafting of detailed plans to help achieve full convertibility of the yuan, raising the prospect of accelerating reforms to free up the currency eventually.

"We should have operational plans on achieving the convertibility of the renminbi (yuan) under the capital account," state radio quoted Premier Li Keqiang as telling a regular meeting of the State Council, or the cabinet.

No details on yuan convertibility were given in a summary of the meeting published on the central government's website, www.gov.cn.

While the Chinese currency is already convertible under the current account - the broadest measure of trade in goods and services - the capital account, which covers portfolio investment and borrowing, is still closely managed by Beijing as it worries about abrupt capital flows.

Chinese officials have not given a timetable on a freely trade yuan, although the central bank has outlined the task of making the yuan "basically convertible" by 2015.

Beijing may have to loosen its grip on the yuan to support its long-term ambition to increase the global clout of its currency to rival the U.S. dollar and euro, analysts say.

Li also said that the government will steadily roll out market-based measures to reform the country's interest rate and exchange rate regimes.

"To stabilise growth and control inflation, risks and upgrade the economy, we must urgently deepen reforms and unveil concrete measures," Li said.

Annual economic growth unexpectedly slowed to 7.7 percent in the first quarter from 7.9 percent in the previous three months.

The government will push forward fiscal reforms while taking steps to rein in local government debt, Li was quoted as saying.

"We should improve the risk control measures on local government debt," he as saying.

China will set up regulations on overseas investment for individual investors while regulating the development of bonds, equity and trust markets, the cabinet said.

The country also plans reforms to railway investment and financing systems, including allowing private investors to enter parts of the state-dominated sector

http://www.reuters.com/article/2013/05/0...OG20130506

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INSIGHT-Despite curbs, China's vast hot money triangle flourishes

http://www.reuters.com/article/2013/05/1...GJ20130519

[CityFarmer]

With tips from Mr. specuvestor, i did a preliminary research on RMB internationalization. Here is the summary. Please feels free to comment, and points out in-inaccuracies, or outright mistakes, Mr. specuvestor. Of course, no obligation.

First of all, definition (well, i am an engineer ). The definition of currency internationalization are
- Store of value internationally (e.g. reserves currency). A point highlighted by specuvestor in his previous posting.
- Medium of exchange (e.g. cross-border trade settlement and payment)
- Unit for accounting unit (e.g. international corp invoicing)

In short, full convertibility DOES NOT mean internationalization. A classic example was Japan's yen was fully convertible in 1980, but not actively used internationally then. It took years for yen to become international currency.

China is opening-up current account with offshore settlement and clearing centers, and allow RMB denominated product e.g. bond and IPOs.

Next, as specuvestor pointed out, is the capital account. Liberalization of foreign direct investment, and buy/sell onshore securities are few examples of opening capital account.

Well, few doubts arises, and will continue to research...

1. Is opening capital account necessary for RMB internationalization? By definition, it is not required. Is this a gimmick used to force China open out her domestic market, rather than for RMB internationalization?

2. Most importantly, with RMB internationalization, any sweet spot available for investors? Few that i can dream out are

- Opening out capital account will attract hot money into onshore stock exchange, which currently only available to QFIIs with approved quota...
- Banks with settlement and clearing services on RMB, and offering RMB deposit and products...

Well, enough for an armature in finance...

[specuvestor]

With tips from Mr. specuvestor, i did a preliminary research on RMB internationalization. Here is the summary. Please feels free to comment, and points out in-inaccuracies, or outright mistakes, Mr. specuvestor. Of course, no obligation.

First of all, definition (well, i am an engineer ). The definition of currency internationalization are
- Store of value internationally (e.g. reserves currency). A point highlighted by specuvestor in his previous posting.
- Medium of exchange (e.g. cross-border trade settlement and payment)
- Unit for accounting unit (e.g. international corp invoicing)

In short, full convertibility DOES NOT mean internationalization. A classic example was Japan's yen was fully convertible in 1980, but not actively used internationally then. It took years for yen to become international currency.

China is opening-up current account with offshore settlement and clearing centers, and allow RMB denominated product e.g. bond and IPOs.

Next, as specuvestor pointed out, is the capital account. Liberalization of foreign direct investment, and buy/sell onshore securities are few examples of opening capital account.

Well, few doubts arises, and will continue to research...

1. Is opening capital account necessary for RMB internationalization? By definition, it is not required. Is this a gimmick used to force China open out her domestic market, rather than for RMB internationalization?

2. Most importantly, with RMB internationalization, any sweet spot available for investors? Few that i can dream out are

- Opening out capital account will attract hot money into onshore stock exchange, which currently only available to QFIIs with approved quota...
- Banks with settlement and clearing services on RMB, and offering RMB deposit and products...

Well, enough for an armature in finance...

Wow Mr CityFarmer... I have to be careful how I word my reply to you in future becuase most of the time I use flaky memory But I like your style... questioning and researching to find out the facts

We can think about it this way: Current account is like free cash flow and Capital account is like financing cashflow. Is free cashflow negative always a bad sign? Not if you are strong growth and investing capex. Is financing cashflow positive a good sign? Not if you are using high cost debt for little returns. This may help you a bit on understanding macro econs using micro understanding with one big difference: macros tend to have self feeding process which is why deficit spending can actually be positive short term, whereas deficit spending ie losses on a company level is almost never positive.

1. The common finance 101 answer is that to internationalise you need to open up the capital account. That is true in the long run but not really in the short term. Instability does not explode overnight, it takes time to build up. Hence it can be sustained over relatively short period of time. I suspect full RMB convertibility between off and onshore will not happen in next 3 years.

2. So a "measured" opening of capital account will drive some money to offshore RMB and help to deflate some of the excess liquidity onshore, rather than massive inflows onshore IMHO. That's because investment in offshore is already available. The no 1 thing I want to see is how S-Chips CEO going to explain why then they cannot take out their "huge cash in RMB" to Singapore

[CityFarmer]

With tips from Mr. specuvestor, i did a preliminary research on RMB internationalization. Here is the summary. Please feels free to comment, and points out in-inaccuracies, or outright mistakes, Mr. specuvestor. Of course, no obligation.

First of all, definition (well, i am an engineer ). The definition of currency internationalization are
- Store of value internationally (e.g. reserves currency). A point highlighted by specuvestor in his previous posting.
- Medium of exchange (e.g. cross-border trade settlement and payment)
- Unit for accounting unit (e.g. international corp invoicing)

In short, full convertibility DOES NOT mean internationalization. A classic example was Japan's yen was fully convertible in 1980, but not actively used internationally then. It took years for yen to become international currency.

China is opening-up current account with offshore settlement and clearing centers, and allow RMB denominated product e.g. bond and IPOs.

Next, as specuvestor pointed out, is the capital account. Liberalization of foreign direct investment, and buy/sell onshore securities are few examples of opening capital account.

Well, few doubts arises, and will continue to research...

1. Is opening capital account necessary for RMB internationalization? By definition, it is not required. Is this a gimmick used to force China open out her domestic market, rather than for RMB internationalization?

2. Most importantly, with RMB internationalization, any sweet spot available for investors? Few that i can dream out are

- Opening out capital account will attract hot money into onshore stock exchange, which currently only available to QFIIs with approved quota...
- Banks with settlement and clearing services on RMB, and offering RMB deposit and products...

Well, enough for an armature in finance...

Wow Mr CityFarmer... I have to be careful how I word my reply to you in future becuase most of the time I use flaky memory But I like your style... questioning and researching to find out the facts

We can think about it this way: Current account is like free cash flow and Capital account is like financing cashflow. Is free cashflow negative always a bad sign? Not if you are strong growth and investing capex. Is financing cashflow positive a good sign? Not if you are using high cost debt for little returns. This may help you a bit on understanding macro econs using micro understanding with one big difference: macros tend to have self feeding process which is why deficit spending can actually be positive short term, whereas deficit spending ie losses on a company level is almost never positive.

1. The common finance 101 answer is that to internationalise you need to open up the capital account. That is true in the long run but not really in the short term. Instability does not explode overnight, it takes time to build up. Hence it can be sustained over relatively short period of time. I suspect full RMB convertibility between off and onshore will not happen in next 3 years.

2. So a "measured" opening of capital account will drive some money to offshore RMB and help to deflate some of the excess liquidity onshore, rather than massive inflows onshore IMHO. That's because investment in offshore is already available. The no 1 thing I want to see is how S-Chips CEO going to explain why then they cannot take out their "huge cash in RMB" to Singapore

Again, i need time to digest the posting... Thanks

[CityFarmer]

Further update on Singapore RMB offshore activities... It seems further activities pending in Singapore, probably good time to learn more on RMB offshore...

Borrowed a book on "The Offshore Renminbi" by Robert Minikin and Kelvin Lau. I picked it up randomly from library.

Any good book(s) on RMB offshore to recommend?

Singapore in further discussions with China on offshore activities: DPM Tharman

SINGAPORE - Following the launch of the yuan clearing bank this week, Singapore is in further discussions with China on areas of collaboration in other offshore activities.

Deputy Prime Minister Tharman Shanmugaratnam, who is in China for an official visit, said the goal is to build a thriving and sustainable yuan offshore market.

http://www.todayonline.com/singapore/sin...pm-tharman

[yccheok]

start with HSBC?
World's global bank?

I think you mean "World's local bank" ?

This is one of my favorite rock solid banking stock. Have been in consistent dividend payout for several years. Current yield is 4% I pretty much love its scrip dividend plan, where you may convert the cash to share. It is particular useful, to avoid government taxing.

[CityFarmer]

HSBC sees 12% revenue dip, and that’s before a S$2b lawsuit hit

LONDON — HSBC posted lower-than-expected earnings yesterday, reviving concerns over legacy issues and growth prospects at Europe’s biggest bank.

Its shares fell more than 4 per cent, after a slowdown in emerging markets contributed to a steeper-than-expected 12 per cent drop in revenues in the first half of the year.

The London-based bank also said it may face a US$1.6 billion (S$2 billion) settlement with a United States regulator over allegations that it mis-sold mortgage-backed bonds during the housing bubble.

The US Federal Housing Finance Agency has alleged that 18 banks misrepresented the quality of the collateral backing securities they sold between 2005 and 2008.

http://www.todayonline.com/business/hsbc...awsuit-hit

[quantcall]

it is very hard for hsbc to grow....not very attractive unless it gets distressed