The Daily Update - RMB Denominated Assets - A Must

We recently wrote a daily on the renminbi-denominated oil futures platform, Dalian Commodity Exchange (DCE), which since its launch has proven to be quite popular with a number of international players signing up almost immediately. Although there is still some way to go in order for RMB-denominated commodity contracts to be more widely accepted internationally, sources have reported that global RMB-contracts in iron ore have spiked this month since the launch of the DCE platform, accounting for roughly 12% of total global trade currently.

This will be of great support to the London Metal Exchange (LME) which is looking to introduce RMB-denominated metal instruments; it would make sense with China being the world’s largest metals consumer. Hong Kong Exchanges and Clearing (HKEX) owns LME, and aside from the RMB gold futures contracts, which were launched almost a year ago, LME allows the use of the RMB currency as collateral. We have not been given a firm date as to when the metal exchange will be announced, however, LME CEO Matthew Chamberlain believes the new RMB metal products will be a success given the increased use of the currency across global finance.

RMB-denominated securities are expected to grow and become more popular as many nations become less reliant on the US dollar; Chinese companies will clearly benefit from reduced currency risk. Iran is also a prime candidate to trade oil futures using the renminbi due to harsh US sanctions;  we have also discussed the merits for Venezuela which has been pricing its oil in RMB for some time. We expect the internationalisation of the currency to gain momentum in coming years and therefore believe having exposure to the renminbi is key for all investors.

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