Yuan next year will substantially expand its presence in Russia

Yuan next year will substantially expand its presence in Russia

MOSCOW, December 30. /Corr. Alina Yevstigneyeva/. The Chinese yuan next year, from exotic tool banking for wealthy clients can become a popular currency reserves both for the population and for the state. These are the plans of banks that intend to issue bonds in yuan, Ministry of Finance and the General reorientation of the economy to the East. In addition, the Renminbi may appear in the composition of currency reserves of the Central Bank.

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While the yuan is not the most popular currency in comparison with dollar and Euro. Genevie deposits for individuals offer, primarily in the private banking system – for example, Alfa-Bank, ROSBANK and VTB 24, and also in the multi-currency Deposit (Sviaz-Bank). “In the last months of the year, the yuan remains popular and relevant currency”, – have informed in alpha Bank. Bank deposits for a wide range of clients while offering mostly far Eastern banks (e.g. the Bank “Primorye” you can open the Deposit in yuans for a period of 1 year at a rate of 3.5%). However, the regionality of these products may soon be challenged by the ambitious plans of major banks, primarily Sberbank. So, in 2016 Herman Gref promised to run genevie deposits for the population. To start the biggest Bank going to the Far East, however, acknowledges that while “the noise is greater than demand”.

Other large banks while cautiously suggests that studying the prospects of the yuan market. “The situation with the yuan will be further analyzed. It is obvious that the potential of the Chinese currency may be large, the number of transactions increases significantly. In an unstable economy investments in the yuan can become the additional tool of protection of capital,” hopes the head of the center of Deposit products of the Bank Natalia Menshova.

SMP Bank, ICB and the Bank said that while anevia products for people to run will not. “The fact that the demand for products in exotic currencies low sufficient thus that their implementation costs money,” explains the Director of the Department of strategy and marketing Alex Ilyushchenko. In IBC, however, do not exclude the issue of cards with Anavim limit in the indefinite future. “Our monetary strategy for the coming year does not involve the release of yanevych banking products, but in the future we do not exclude the possibility of the appearance card lines in this currency”, – explained the press service.

In the segment of corporate banking and trade Finance, the yuan will gain momentum faster. As reported by senior managing Director – head of trade Finance and correspondent relations Sberbank CIB Andrey Ivanov, the Bank sees great potential in yanevych products and plans to develop them in 2016. According to him, this year was marked by significant interest from clients for funding of contracts in yuan: so, January was released more than 150 letters of credit in RMB for customers from many regions of Russia, leading the business in different sectors of the economy. “In 2016 the savings Bank planned to continue to increase cooperation with banks in the Asia-Pacific region across the entire product line of trade financing of Sberbank”, – he assured.

Yanely benchmark

A significant event for the bond market next year may be imminent placement of debt in yuan. The Finance Ministry plans to place via the Moscow exchange a loan of about 6 billion yuan ($1 billion, i.e. one third of the total plan for external placements of the Russian Federation for the next year) for Chinese investors. In the Ministry hope that this will help the development of the debt market in General. “A key objective of such a transaction, if it ultimately takes place, the domestic financial market development and its linkages with the financial market of China”, – explained the Deputy Minister of Finance Maxim Oreshkin. As expected, placing the state in the yuan could be followed by corporate issues.

Although the Ministry of Finance and stressed that genevie host only for residents of the PRC, the Russian banks are ready to consider participating in their purchase. “We view the sovereign securities of the Russian Federation as a reliable investment tool, but an opportunity to invest in currency bonds, including RMB, will depend on how will develop the situation of the market in 2016, ruble and currencies, foreign currency liquidity of the Bank”, – said the head of the Directorate of financial institutions and investment services UBRD Vladimir Zotov.

“The decision on purchase of currency bonds of the Ministry of Finance will depend on the market situation in 2016. Currently to buy bonds in RMB no”, – commented in the ICD. Potentially interested in such issues in Absolut Bank. “Given our active work on the securities market of currency bonds of the Ministry of Finance can present us with some interest,” – said Director of investment and trading Department Absolut Bank Sergei Mikhailov.

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Refer to specific parameters of editions yanevych bonds of the Ministry of Finance would like and VTB. “The feasibility and degree of participation in the placement of currency bonds of the Ministry of Finance denominated in yuan, the Bank will determine, given the parameters of a proposed loan,” – said senior Vice President, Director of Treasury at VTB 24 Dmitry Orlov.

The Finance Ministry was unable to provide additional comment on the plans offerings in the yuan.

According to informed sources, the Bank of Russia in November has included the Chinese yuan in the list of currencies used for investments in international reserves, but in the near future no plans to produce purchases of assets denominated in RMB. Since the Central Bank discloses information about currency structure of reserves with half a year delay, until official confirmation of this information is not available.

High risks

Russian banks have tried to massively launch the products in exotic currencies such as Japanese yen, Swiss francs and British pounds. A decade ago even deposits and loans in these currencies were sold to the populace as “most reliable”. However, if the contributions (apart from historically falling Japanese yen) experiment more or less failed, unhappy with exotic loans were very many. The fact that the ruble weakened against the currencies of U.K. and Switzerland, which significantly increased payments on loans. As a result, banks had to introduce a special restructuring program.

Partner BDO in Russia Denis Taradov believes that genevie banking products are only interesting for the specific regional companies with revenues in the Chinese currency. “For next year it’s unlikely to be a hot topic. As we stepped up relations with China, perhaps in 2-3 years may be the result,” he says, stating that the yuan may gain a market share of only 1-3% in the corporate segment and will not in the foreseeable future to compete with the dollar and the Euro.

The risks to the population from obscure foreign currency deposits and loans is quite high. This is acknowledged both by experts and the Ministry of Finance. “I do think that these strange currency to the population is wrong. Our population must stay in the ruble zone. Any attempt to drag the population into some other kind of thing is very dangerous, because once you start this type of investment, once it becomes clear that risks are not hedged, but hedge to their population expensive. So I’m against it”, – explained his position earlier, Deputy Finance Minister Alexei Moiseev. The Deputy Minister said that investment in the yuan should be left to qualified investors.

Taradov with the Ministry of Finance agree: it is difficult to predict the risks, especially for ordinary people. “People are now more carefully the effect of currency fluctuations relates to any currencies, except for ruble-dollar. The bulk of the population does not understand the specifics of the Chinese economy. It had its UPS and downs, the risk that no one understands what could happen to her” – says the expert.

Meanwhile, the cooling of the Chinese economy is one of the global risks of 2016. Although in comparison with the collapse of the ruble in the current year against the dollar and Euro to the yuan, the ruble relatively stable: at the beginning of the year the Chinese currency was worth 10,11 rubles/yuan, by the end – 11,18 rubles/yuan. In many ways, this “stability” refers to the fact that the people’s Bank of China in 2015 conducted two waves of devaluation of its currency in August and December.

The biggest wave of devaluation of the Chinese regulator conducted in mid-August, reducing the official rate of the yuan within a few days by 4.6%. In early December, the IMF Board of Directors decided to include the yuan in the basket of special drawing rights (SDR), which includes the dollar, Euro, pound sterling and Japanese yen. The decision will come into force on the first of October 2016, the yuan will get 10.9% in the basket, finishing in third place after the dollar (41,73%) and Euro (30,93%). It is expected that in the future the yuan will become a freely convertible currency that does not preclude its already market devaluation.