HONG KONG
PROFIT&LOSS
NOVEMBER 14, 2017
Contents: Lessons and Reflections from 90 Years in FX .............................4 Asia Growth Outlook: Sustaining the Momentum .......................6 Peer2Peer Interview: Clearing, OTC and Uncleared Margin Requirements: Where do we go from here?....................8 RMB Internationalisation: Slow and Steady Progress...............10 Peer2Peer Interview: House of Cards? ....................................14 Are Digital Currencies Here to Stay? .........................................16 Execution: Cause & Effect .........................................................18 FinTech: Promise or Peril? .........................................................20
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Lessons and Reflections from 90 Years in FX
Colin Lambert, Managing Editor, Profit & Loss David Clark, Chairman, The Wholesale Market Brokers’ Association Honorary Past President, ACI – The Financial Markets Association 4
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Asia Growth Outlook: Sustaining the Momentum
Brenton Battenfeld, Senior Portfolio Manager, Rafiki Capital Management Sean Yokota, Head of Asia Strategy, SEB Alexander Wolf, Senior Emerging Markets Economist, Standard Life Aberdeen David Clark, Chairman, WMBA 6
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Peer2Peer Interview: Clearing, OTC and Uncleared Margin Requirements: Where do we go from here?
Moderator: David Clark, Chairman, WMBA Jacky Mak, MD, Head of OTC Clearing, HKEX 8
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the onshore CNY and offshore CNH markets are unlikely to merge any time soon, said speakers at Profit & Loss’ Hong Kong conference.
rMB internationalisation: slow and steady Progress teps taken by the Chinese authorities in recent years towards liberalizing its economy, prompting speculation that these two markets could soon collide and the RMB could become fully convertible. For example, the Renminbi Qualified Foreign Institutional Investor (RQFII) was a policy initiative introduced in 2011 that allows foreign investors who hold the RQFII quota to invest directly in Mainland China's bond and equity markets. In 2014 the Shanghai-Hong Kong Stock Connect, a cross-boundary investment channel that connects the Shanghai Stock Exchange and the Hong Kong Stock Exchange, was introduced, enabling investors in each market are able to trade shares on the other market using their local brokers and clearing houses. In 2015 the International Monetary Fund (IMF) is added RMB to the basket of currencies that make up the Special Drawing Right (SDR). This meant that the IMF had determined that the RMB is freely usable and reflected China’s expanding role in global trade and the substantial increase in the international use and trading of the RMB. It showed recognition of the progress made in reforms to
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China’s monetary, FX, and financial systems, acknowledging the advances made in liberalising, integrating, and improving the infrastructure of its financial markets. More recently, in 2017, Bond Connect, a mutual market access scheme that allows investors from Mainland China and overseas to trade in each other's bond markets, was launched, further opening up China’s capital markets. However, although the panellsists at the conference agreed that there has been a “major liberalization” of China’s markets, they suggested that RMB is unlikely to become fully convertible any time soon. “I have always considered the delineation between China and the global market as a wall that’s not coming down, but it is a wall that is having holes put into it. And those holes have little valves that allow you to torque up or torque down any type of market flow going through,” said one speaker. They added: “Over the next five years I don’t think it’s going to be a priority of the Chinese authorities to make the renminbi fully convertible.” The panel broadly agreed that China is taking a very pragmatic approach to liberalizing its capital markets www.profit-loss.com
and that the government is very concerned about being able to control outflows of capital. “I think that [China] will continue to internationalise its markets, but in a very gradual manner. One thing that I think is important to remember is that although we’re going to see more direct access to the onshore bond market right here in Hong Kong, the percentage of f Chinese bonds held by foreign investors is still very, very low. It’s going to be very difficult for the Chinese authorities to open up, be more liberal and allow capital outflows before they see more material inflows. However, they’re very focused on making the bond market more attractive for people to come and invest in, so I think that when they see more foreign investment – probably over the next year or two – they will become a little bit more confident in terms of opening up their capital account,” noted one panelist. Another speaker noted that the massive growth in CNH trading has lead to speculation in financial markets that China will eventually want to challenge the position of the US dollar as the global reserve currency. However, they contested this perspective, arguing instead that Chinese authorities simply want a more balanced world in terms of currency trading, and that not just RMB but also the euro could act as just such a counterbalance from a Chinese perspective. “I don’t think that the end goal here is full capital reform and the opening up of the capital account. I think that there will be more reform, but it will happen in small steps. This could potentially involve expanding the trading bands for CNY or develop commodities products that price in RMB that can be traded by businesses overseas. This would actually encourage greater use of RMB,” they said.
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CNY vs CNH- How will the onshore/offshore debate settle ?
Jake Fisher, Director, Global RMB Development, BMO Financial Group Geertjan van Bochove,Director, Head of Analytics, Asia Pacific, SWIFT KC Lam, Head of FX & Rates, SGX Patrick Law, Managing Director, Head of North Asian Local Markets and Co-Head of Asia NDF Trading, Bank of America Merrill Lynch Moderator: David Clark, Chairman, WMBA
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Coffee Break, Exhibition Hall
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Peer2Peer Interview: House of Cards?
David Clark, Chairman, WMBA Ravi Pandit, Executive Director, FX Products, CME Group 14
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Are Digital Currencies Here to Stay?
Aurélian Menant, Founder and CEO, Gatecoin Limited Arthur Hayes, CEO, BitMex Dave Chapman, Managing Director, Octagon Strategy Limited Moderator: Galen Stops, Editor, Profit & Loss 16
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Execution: Cause & Effect
Ping (Yan Pheng) Tan, Global Head of EFX Liquidity, Head of Asia EFX Trading, Bank of America Merrill Lynch Eva Chen, Head of e-FX Trading, Global Markets, Bank of China (Hong Kong) Jay Hurley, Regional Head of eFX, APAC, State Street Michael Ng, Director of e-FX Trading, Natixis 18
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FinTech: Promise or Peril?
Moderator: Galen Stops, Editor, Profit & Loss Musheer Ahmed, Interim General Manager, Fintech Association of Hong Kong Christophe Lee, Founder, JP Asia Partners Keiren Harris, Founder, Market Data Guru 20
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