The HKD-RMB dual counter launched by Hong Kong Stock Exchange is expected to support the internationalization of RMB in the long run by expanding the scope of investment assets for offshore RMB holders, but the impact on the short-term average daily turnover is limited, said Morgan Stanley in a research note.
The first phase of the scheme covers 24 stocks, but Southbound Stock Connect investors can’t buy the stocks at this stage, and a near-term increase in capital inflow and trading volume of HKEX would be limited, as the decision to invest will depends on the market environment and opportunities, which are still challenging, it said.
More importantly, the dual counter model will not help investors reduce foreign exchange risks and will be embedded in the RMB stock price through the market-making mechanism, it said. Even though Southbound Stock Connect inflows may be included in the future, the size of inflows will still be mainly affected by the launch of onshore mutual funds, as the dual counter model does not change the threshold for southbound investors.