Hong Kong regains favour as investors turn to mainland China and yuan: Deutsche Bank Hong Kong’s corporate activity and yuan-driven business have been revitalised as global market participants strengthen ties to China’s economy amid tariffs and geopolitical tensions, according to a senior executive at Deutsche Bank. Companies and investors have increased their exposure to China and hedged against the US dollar as they adjusted their supply chains and portfolios amid market volatility, said Ole Mattiessen, head of corporate banking for Asia-Pacific, Middle East and Africa, during a briefing in Hong Kong last week. “We are seeing market participants across the corporate and institutional sectors thinking about hedging against risks” amid once-in-a-decade volatility in the foreign-exchange market, said Singapore-based Matthiessen, who is also the global head of cash management for the German lender. This volatility included significant US dollar depreciation against Asian currencies and fluctuating interest rates influenced by the economic outlook, tariffs and geopolitical tensions, he said. “As part of that thinking, the discussion of the [yuan] as a world currency has resurfaced and grown stronger as a trend,” he said. Corporate and individual clients were keen to “adopt a currency to keep their wealth for value preservation and risk-management reasons”. The trend was amplified as Chinese firms accelerated their global expansion plans, further leveraging Hong Kong’s financial and investment resources, he added. Mattiessen said many corporate clients that previously retreated from Hong Kong in favour of Singapore were reconsidering their dual-hub structures. These companies – in industries such as logistic and consumer products that relied on procurement and supply chains in China – recognised “Hong Kong’s value as a connected global gateway and its direct links to mainland China”, he said. “It is a healthy trend that underscores the importance of Hong Kong in the global arena for export and import activities, particularly as mainland Chinese companies pursue their global ambitions.” Hong Kong would play a pivotal role as “the conduit for [yuan] transactions”, he added. The city has the largest offshore yuan deposits and processes nearly 80 per cent of global offshore yuan payments. China’s trading partners in Asean and Africa were adopting yuan settlement as they looked for alternatives to the US dollar, Mattiessen said. “We see significant demand for facilitating trade activities in these markets, helping corporate clients connect with local banks to manage currency fluctuations and trade financing,” he said. Chinese infrastructure companies were also involved in building production facilities in countries like Vietnam and Indonesia, creating capital flows in yuan, he said. “Typically, where you see a surge in trade relationships. You also observe capital investment circulating back into these regions, reflecting the economic balance generated between underlying trade activity and capital investment,” Matthiessen said. Deutsche Bank’s Hong Kong corporate banking business grew significantly over the last two years, reflecting the “rejuvenation” of corporate activities and services, he added. In the first quarter, activity with clients headquartered in Asia-Pacific, the Middle East and Africa grew about 10 percentage points faster than the bank’s global corporate business on a year-on-year basis. “From an investor perspective, we see exposure to China as an attractive opportunity within one of the world’s most dynamic economies,” said Matthiessen, referencing deepening financial ties between the Middle East and China. The bank’s deposit balances in China increased more than 20 per cent year on year in the first quarter, as clients sought a European alternative to US banks, Matthiessen said. The deposit growth was driven by foreign direct investments and income generated in China, along with clients allocating capital to long-term infrastructure projects that had been on hold. “Hong Kong’s significant growth potential is linked with how attractive the Chinese market becomes to global investors, clearly defining Hong Kong’s role, as all of these activities will happen in and around the city,” Matthiessen said. https://www.scmp.com/business/banking-finance/article/3312425/hong-kong-regains-favour-companies-and-investors-turn-china-and-yuan-deutsche-bank (ICE HONG KONG)

Fonte notizia: South China Morning Post