Hong Kong removes yuan conversion limit

　　Move expected to benefit new stock plan

Hong Kong will lift the 20,000 yuan ($3,265) daily limit on yuan conversion for local residents from Monday, when the Shanghai-Hong Kong Stock Connect plan will be launched, the Hong Kong Monetary Authority (HKMA) announced Wednesday on its website.

Norman Chan, chief executive of the HKMA, said Tuesday that the removal of the daily yuan conversion limit will facilitate Hong Kong residents' participation in the new share trading scheme and will also help with other yuan investments and transactions, news portal china.com reported Tuesday.

The lifting of the limit is good news for the stock plan, which may see high demand for yuan in its initial phase, Li Daxiao, director of Shenzhen-based Yingda Securities Institute, told the Global Times Wednesday.

The new policy will also strengthen Hong Kong's role as an important offshore yuan market, and yuan-denominated transactions will increase, he noted.

Meanwhile, the daily 80,000 yuan remittance limit will remain, and Hong Kong has an offshore yuan liquidity pool of 1.1 trillion yuan, Li noted, so removing the daily conversion limit will not result in big fluctuations in the offshore market.

Leung Chun Ying, chief executive of the Hong Kong Special Administrative Region, said removal of the limit will improve Hong Kong's position as an offshore yuan center, adding that it showed support from the central government for the development of Hong Kong's financial market, the china.com report said.

As well as benefitting the stock connect scheme, removing the limit should mean that the city will see a bigger range of yuan-denominated investment products designed for local residents, according to a research note sent to the Global Times Wednesday by Australia and New Zealand Banking Group (ANZ).

Non-residents in Hong Kong have been able to convert unlimited daily quantities of yuan since 2012, but residents have had a daily limit of 20,000 yuan since 2004 in a bid to avoid currency speculation, Reuters reported Wednesday.

Removing the cap limit is not likely to alter the yuan onshore exchange rate in the long run because the rate is still mainly determined by macroeconomic factors and China's policies, according to ANZ's research note.