Hong Kong’sSecurities and Futures Commission said it welcomes the lessening of restrictions to RQFII, according to a statement. 

“We are pleased to see the expansion of the RQFII pilot scheme, which provides new opportunities for the industry and the investors in Hong Kong. The changes will allow more market players to participate in the RQFII scheme, promote the development of a broader range of renminbi investment products, and strengthen Hong Kong’s status as a premier offshore renminbi centre,” SFC deputy chief executive Alexa Lam said.

Progression

The amendments will, among other effects, increase the types of qualified RQFII holders as well as relax investment restrictions of RQFII funds, the Hong Kong regulator said.

Z-Ben Advisors added that this progression opens the programme to essentially any foreign financial firm domiciled in Hong Kong, much to the delight of “many major foreign financials with any kind of significant presence in Hong Kong”.

“In [our] opinion, there will be no guinea pigs among these foreign giants; we anticipate at least twenty will be lining up to apply for an RQFII license in the coming months,” said the China market intelligence specialist.

The SFC said it will “continue to maintain close dialogue with the Mainland authorities to facilitate the development and implementation of the RQFII regime”.

The expansion plan comes after Lam prompted banks to “start thinking which of your products would be suitable for the Mainland market, why they would be suitable, who your target investors would be, and how your products would help them,” in January.

She continued: “This is because the Hong Kong-Mainland fund platform that we are building will likely be Asia’s largest and deepest."

RMB appeal

In Hang Seng's recent Renminbi Monitor report, the bank’s chief economist, Joanne Yim said the RMB exchange rate is expected to strengthen slightly this year, predicting an appreciation of 1.4 per cent for the RMB compared with the end of 2012.

The Mainland authorities could also widen the daily trading band for the USD/RMB exchange rate to 1.5 to 2 per cent, from the current 1 per cent. Overall, the RMB exchange rate has appreciated over 30 per cent against the dollar since 2005, she added.

With the RMB gaining increasing acceptance globally, more companies will choose to settle their cross-border trade in RMB. The amount of cross-border trade settlement in RMB could grow by about 20 per cent in 2013, faster than Hong Kong’s total trade flows with the Mainland, the Hang Seng report said.

According to the bank, Hong Kong’s offshore RMB deposits, excluding Certificate of Deposits, could account for over 25 per cent of total deposits in Hong Kong by 2015, from less than 10 per cent at the end of 2012. This would make RMB deposits the second largest source of deposits in Hong Kong, replacing the position long held by US dollar deposits.