RMB and the Luxembourg Stock Exchange
In May 2011, the Luxembourg Stock Exchange (LuxSE ) was the first trading platform to list a commercial Dim Sum bond outside China. As the premier listing place for international bonds, the LuxSE has closely followed the internationalisation of the renminbi from the beginning and has successfully promoted this activity to international issuers.
Global Dim Sum capital markets operations have increased substantially. Robert Scharfe, CEO of the Luxembourg Stock Exchange, has witnessed over the last two years an evolution unseen by other financial centres. "We currently have 40 bonds listed in Luxembourg for a total amount of 24.5bn RMB, which gives us roughly a 25 per cent market share of all issues denominated in RMB. Regarding Dim Sum bonds listed on European exchanges, we have a market share of 66 per cent".
The majority of issuers originate from Europe, while roughly a third come from the US and Asia. "Our aim is to increase the amount of Asian borrowers by increasing our physical presence in that spot in Asia and promoting the activities of the Luxembourg Stock Exchange", Mr Scharfe says. Although Luxembourg is already very much on the map for Asian borrowers in other currencies, they are often unaware of the importance of the RMB business that already exists in Luxembourg. That is why the LuxSE is intensifying its contacts with a number of Chinese financial institutions. "We also leverage on the presence of Chinese banks in Luxembourg to serve as a promotion arm for our capital markets activity", Scharfe says.
However, the listing of Dim Sum bonds is only one aspect. There is also the renminbi qualified foreign institutional investor scheme, RQFII, a tool for foreign investors with presence in Hong Kong to channel their RMB funds in order to invest into the mainland securities market. "Eighty per cent of the RQFIIs are likely to be channelled into bonds", Mr Scharfe explains. "The most important Chinese actor in this regard is the Shenzhen Stock Exchange. Similar to the LuxSE, they are also specialised in fixed income listings. The RQFII business might create potential synergies between our exchanges, which we are currently investigating more in detail".
A third aspect that will strengthen the role of the LuxSE is being right on Luxembourg’s doorstep. "We want to convince more asset managers of Luxembourg Sicavs offering RMB share-classes to their clients to list them at the LuxSE. This will provide more comfort to investors through more transparency and the advantage of fund tradability". For Mr Scharfe, the aim is clear. "We will contribute our part to become the Robert Sch arfe, premier RMB centre in the Eurozone".