Hong Kong’s small and medium enterprises (SMEs) expect the Chinese currency the renminbi (RMB) to comprise one third of their foreign exchange (FX) volumes in six months’ time, according to the most recent Asia Business Foreign Exchange (ABFX) report from East & Partners Asia.
The firm researched the FX trading of 1843 SME businesses in Malaysia, Hong Kong, Singapore and the Philippines in August.
For the first time in the bi-annual research, SMEs – defined as businesses turning over between US$1m-120m each year – were asked to nominate their top trading currencies and the percentage of their total FX trading each currency comprised. They were then asked to forecast that percentage in six months’ time.
Hong Kong SMEs, as expected, were most engaged with the RMB, with the currency currently representing 27.7% of trading volume, forecast to grow to 33.3% in six months. The RMB was nominated as a top three currency by 48.6 percent of Hong Kong SMEs.
Engagement levels in Singapore were lower, with the RMB currently representing 11.9% of FX volumes, with a six month forecast of 15.2%. Only 31.6% of SMEs nominated the RMB as a top three currency.
The RMB did not feature as a top three currency in the Philippines or in Malaysia, where engagement levels are yet to register with the ABFX research.
In Malaysia, the top three trading currencies are the US dollar (USD), the Singapore dollar (SGD) and the local Malaysian ringgit (MYR).
In the Philippines, the top three are the USD, the Philippine peso (PHP), and the euro (EUR), which accounted for 12.9% of trading volume.
Darryl Ye, senior analyst with East & Partners Asia in Singapore, said the Hong Kong and Singapore results showed that engagement with the RMB was not confined just to the largest, Institutional, segment of the market.
“A lot has been written about RMB engagement by the largest institutional sized businesses, but the ABFX research shows that the engagement is growing through all business segments,” said Ye.
“This is perhaps an even stronger indication of the traction the RMB has among Asia’s trading businesses, and we wait with interest to see if the currency will appear, over time, in our research of the Malaysian and Philippines markets as well.”
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