Standard Chartered Renminbi Globalisation Index Up 3.26% m/m to 2,407 in September

Published 
  • High FX turnover again fuelled index, yet figure may fall in Q4 after normalisation

Taipei – Standard Chartered today announced that the Standard Chartered Renminbi Globalisation Index (Bloomberg: SCGRRGI ), or the RGI, rose 3.26% m/m in September to 2,407 from a revised 2,331 in August.

For a second month, the post-reform jump in FX turnover fuelled most of the RGI rise. Our longstanding premise is that while Beijing has no intention to artificially devalue the currency now that the CNY daily fixing reform is complete and criteria for SDR inclusion have largely been met, depreciation expectations are likely to persist in the market as long as China’s economy stays weak. The FX turnover component of the RGI is likely to reverse in Q4 after a volatile Q3 and we expect the RGI to fall in Q4-2015, notwithstanding the continued resilience of cross-border Renminbi payments.

We expect Renminbi denominated cross-border payments, which were the only product component that did not detract from the index during the summer volatility in the CNY, to remain steady after three consecutive months of resilient flows. The launch of the Cross-Border Interbank Payment System (CIPS) on 8 October, enabling more efficient clearing and settlement of cross-border Renminbi payments across multiple time zones, should further support growth in Renminbi payments.

On the other hand, CNH deposits were the biggest drag to the index. Deposits in Hong Kong dropped 8.5% m/m to CNY 895bn in September, while those in Taiwan fell 1.8% to CNY 321bn. However, we expect Renminbi deposits in Taiwan to reach c.CNY 340-350bn by end-2015. While this falls short of our previous forecast of CNY 400bn, it would still be higher than the CNY 302bn of deposits recorded at end-2014.

Looking forward, we see various new policy steps in Taiwan, Singapore and Germany that would accelerate Renminbi internationalisation. Financial regulators from Taiwan and China pledged to further deepen cooperation during a recent cross-straits dialogue and central bank announced an expansion in the scope of Renminbi business conducted in Taiwan at the end of October. In late October, Germany’s biggest exchange Deutsche Boerse AG and China Foreign Exchange Trade System (CFETS) agreed on a joint venture to host interbank products, particularly Renminbi-denominated currency and interest rate trading, which will begin trading on 18 November. Singapore also expanded the initiatives with China including the Suzhou Industrial Park and the Singapore-Sino Tianjin Eco-City, which should further increase flows through Singapore.

Standard Chartered launched the RGI in November 2012. The Index covers seven markets in offshore RMB business: Hong Kong, London, Singapore, Taiwan, New York, Seoul and Paris. It measures business growth in four key areas: deposits (denoting store of wealth), Dim Sum bonds and Certificate of Deposits (as vehicles for capital raising), trade settlement and other international payments (unit of international commerce) and foreign exchange (unit of exchange). As the Renminbi further internationalises, there is capacity to include additional parameters and markets.

Standard Chartered Renminbi Globalisation Index

Objective

The first industry benchmark that effectively tracks the progress of RMB business activity.  Offers corporates and investors a quantifiable view of the latest trends, size and levels of offshore activity that are driving RMB adoption

Index Parameters

Deposits

Dim Sum Bonds and Certificate of Deposits

Trade Settlement & Other International Payments

Foreign Exchange Turnover

Markets

Hong Kong

London

Singapore

Taiwan

New York

Paris

Seoul

Investability

Non-tradable

Frequency

Monthly

Base value and date

100 at 31 December 2010

Inception Date

14 November 2012

Methodology

Weight of each of the four parameters are inversely proportional to their 24-month normalized standard deviations

Get the latest RGI interactive infographic in one place by visiting Global Research’s RGI tracker on BeyondBorders

Most recent episodes

Future Monetary Policy Path Sets Markets Against Central Banks

Welcome to the latest edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management.

05:19

Podcast - Journeys to Treasury Deep-Dive: Cash Flow Hedge Accounting at JT Group

Listen to this audible case study, which provides a lens over the details of a recent cash flow hedge accounting project undertaking by the JT Group treasury team.

33:38

Podcast - Innovation as an Enabler: Sustaining Global Trade Finance in Uncertain Times

J.P. Morgan's Bayo Osolake, who joins Eleanor Hill (TMI) to discuss how treasurers can facilitate global trade in the currently turbulent macroeconomic environment.

13:07

Relative Normality On Horizon — But Divergent Monetary Policy Pathways Likely

Welcome to the latest edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management.

06:34

Audio TMI - MMF Reform Proposals Threaten LVNAV Viability for European Treasurers

Proposed MMF changes currently being debated at European Commission level endanger the utility of one of the most popular forms of MMF used by corporate investors across the continent.

Audio TMI - Special FX

Two experts from NatWest share the inside track on how treasurers can better manage FX risks by shaking up legacy processes and old-fashioned thinking, improving data coll...

15:27

Audio TMI - Roadmap Towards a First-Class Group Treasury

As the perennial debate continues around the pros and cons of a centralised tre...

12:28

Audio TMI - How Etihad Covered all Three ESG Elements in One Sustainability-Linked Financing

Etihad Airways recently raised US$1.2bn in the first sustainability-linked loan in global aviation with terms that relate to all three areas of ESG.

13:26

Reducing Friction in International Payments: Five Steps for Treasury Teams

What are the steps that treasury teams can take to remove roadblocks in processing international payments? Daniela Eder, Gibran Maqsood, and Karsten Becker (Barclays) to answer this question.

30:31

Keeping the Plates Spinning: the Art of Treasury Project Management

Sandra Shen (Actualize Consulting) joins TMI's Tom Alford to offer professional insight into what defines successful treasury project management. 

18:27