The cost of borrowing RMB in Hong Kong today reached the highest since records began. Investors are transported into the Chinese territory of the yuan, in order to take advantage of onshore, offshore exchange rate difference arbitrage.
On Monday, Hong Kong overnight bank lending rate (Hibor) shot up 939 basis points on Friday soared from 4% to 13.4%, the highest in June 2013 the highest level since records began. 7 days between Hong Kong banks lending rate also rose sharply from the 7.05% of 11.23% on Friday. Analysts say the recent onshore and offshore renminbi spread widened trigger arbitrage activities, prompting a significant tightening of offshore renminbi liquidity, short-term inter-bank lending and thus will push up interest rates.
Offshore and onshore exchange rate spreads on the 6th of this month reached an unprecedented 1,600 points. At present the two sides spread about 1200 points. Many investors choose to buy renminbi offshore market sell in Chinese mainland arbitrage.
In addition, the central bank interventions on the yuan could boost the liquidity squeeze. Standard Chartered Bank (SCB) senior interest-rate strategist in Hong Kong, Liu Jie in an interview with Bloomberg interview, "offshore renminbi liquidity tightened again, primarily due to a suspected offshore RMB spot market interventions influence." Last week, Chinese Bank at the behest of China's central bank intervened in the foreign exchange market, in the capital Dahon choose to hold rather than sell the yuan, to some extent boost the liquidity squeeze.
Meanwhile, DBS Bank Wealth Management Solutions division in Hong Kong director Tommy Ong pointed out that the funds transferred offshore from the onshore market, many channels are blocked, which to some extent caused by the supply of RMB in Hong Kong market shortage.
Today, the Hang Seng China Enterprises Index dropped by 5%, in October 2011 fell to the lowest level.
The 7th Bloomberg citing informed sources, the Chinese central bank to consider additional measures in addition to outside intervention, in order to avoid sharp fluctuations in the yuan exchange rate. Major central bank to consider measures to limit foreign hot money speculation in particular, or the use of offshore onshore exchange differences arbitrage, China will increase efforts to verify the background of false trade transactions.
On the 8th, and today the central bank for two consecutive days, respectively, the yuan central parity rate expires earlier closing prices sharply up 300 and 250 points.