A joint venture designed to promote greater availability of Chinese financial instruments, including exchange-traded funds, to European investors is scheduled to begin trading operations on 18 November 2015.
The new initiative facilitates the listing of renminbi-denominated securities in Europe, helping to promote the internationalisation of the Chinese currency.
Securities trading on the new exchange will be renminbi (RMB)-denominated, helping to support the internationalisation of the currency while also addressing the growing demand for offshore RMB products. RMB internationalisation has been deemed a crucial step in securing the yuan’s status as a reserve currency of the IMF as well as being important in the classification by MSCI of China in their emerging markets index. A well-functioning market with offshore investment and trading opportunities is a great leap forward in this process.
Ownership in the new company, the China Europe International Exchange (CEINEX), is divided between its three participants, the Shanghai Stock Exchange (40%), the China Financial Futures Exchange (20%), and Deutsche Börse (40%).
Dr. Gui Minjie, Chairman of Shanghai Stock Exchange, commented: “In the context of China’s capital market liberalisation, the offshore trading platform set up by the three exchanges will further promote the two-way opening up of China’s capital market, enrich the product line of the offshore RMB market and accelerate the pace of Renminbi internationalisation. The joint venture is a major step forward in the cooperation between our three exchanges.”
Continuing on this theme, Zhang Shenfeng, Chairman of China Financial Futures Exchange. “The establishment of the RMB asset trading platform in Frankfurt by Shanghai Stock Exchange, China Financial Futures Exchange and Deutsche Börse is a milestone for Chinese exchanges and capital markets in general. It will help pave the way for further opening up of China’s capital market and contribute to RMB internationalisation.”
Carsten Kengeter, CEO Deutsche Börse AG, added: “CEINEX is a milestone in the strategic co-operation amongst our three exchanges. Its value proposition to ‘trade China in international markets’ is a major step forward in the internationalisation of the RMB. It provides a sound basis for the development of a successful capital market between Europe and China.”
A memorandum of understanding has also been signed between China Construction Bank and CEINEX. The agreement between the two parties pertains to ensuring investor demand for offshore RMB financing and investment is met, adding support for easy investment and tradability of stocks, bonds, and ETFs listed on the exchange.
The first products to be traded will cover cash market instruments such as the Commerzbank CCBI RQFII Money Market ETF (CCME), the first renminbi-denominated and traded money market ETF, which was launched on the London Stock Exchange and Euronext Paris earlier this year.