November 11, 2019 / 1:14 PM / a month ago

London's share of global yuan trading declines in August vs May- report

Nov 11 (Reuters) - London’s market share as a global centre for trading the offshore Chinese currency slipped in August versus May, according to a quarterly report published on Monday by the City of London Corporation using a mix of official data and turnover figures.

While the world’s biggest currency trading hub retained its dominance in offshore yuan trading, comfortably beating other financial centres including Hong Kong and Singapore, the United Kingdom accounted for 43.9% of global offshore renminbi transactions in August, down from 44.5% in May.

However, daily turnover averaged 85 billion pounds in August, up 9% compared with May and up 23% annually.

The higher turnover is in line with the Bank of International Settlements’ triennial survey in August, the most comprehensive survey of the global currency markets, which showed the Chinese currency was the world’s eighth most traded currency with an overall market share of 4.1%.

The Chinese currency remained the most heavily traded emerging market currency as trade tensions between Washington and Beijing fuelled interest among hedge funds and banks to trade the offshore yuan.

Since the U.S.-China trade war began around March 2018, when Washington unveiled the major tariffs on some Chinese imports, the offshore yuan has weakened around 10% versus the dollar.

It rallied at the start of November as investors grew optimistic about a China-U.S. trade deal, which could see the removal of the tariffs.

By the end of August, there were 102 Dim Sum bonds - bonds issued outside of China but denominated in Chinese renminbi - listed on the London Stock Exchange, seven of which were listed between June and August 2019.

The average coupon rate for Dim Sum bonds listed on the London Stock Exchange is 4.33%, which may make the bonds more attractive to long-term investors than negative-yielding European government debt.

Reporting by Elizabeth Howcroft; Editing by Saikat Chatterjee and Kirsten Donovan

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