Hong Kong/China Bank Accounts & Investments

[Guest]

I find the topics raised by Bob & Fountainhall to be very interesting, so hope you don't mind me moving them to a dedicated thread?

 

I have a Baht account in Hong Kong, and so I sometimes take more than the limit. I don't wish to maintain a large supply of Baht in Thailand because of the difficulties getting it out should anything happen to me.

Out of curiosity only, can you open in Hong Kong an account with Chinese yuan without any hassle and would you know what interest rates they pay? Given one can expect (hope?) that the yuan will appreciate to the US dollar about 5-6% a year, some interest on top of that might make it interesting.

Also, do you know if there's any hassle or issue of wiring those funds back to the US or UK?

Presently only Hong Kong residents (i.e. those with Permanent Residence status) can open Yuan/Renminbi deposit accounts.

 

http://www.hsbc.com.hk/1/2/hk/banking/rmb

If you want to deposit a reasonably large sum, one way round this might be for you to form a company in Hong Kong (costs around US$1,000 plus a little each year for accounts, audit and formal tax filing). That may sound an odd way to go about it, but you don't need to be a resident of Hong Kong to be the owner of a limited company there. Plus you only need one director who does not need to live there - so you can live in Thailand and still be the sole director and shareholder. Hong Kong corporate tax regulations permit lots of allowances. So you can have a contract with yourself and not only pay yourself a salary, but also an allowance for your Thailand accommodation. Both will be tax deductible. These can more than offset whatever interest you are earning so you end up paying no tax. Also moving funds in and out of Hong Kong is incredibly easy and you can do it on the internet.

 

Sorry I do not know the rates. There is usually a small variation between banks, with HSBC often offering the least competitive rates. I'd try the Bank of East Asia.

 

Another possibility to gain the advantage of the expected rise in the currency would be to invest in a bunch of conservative H shares on the Hong Kong Stock Market. These are shares in Chinese companies which are listed on the Hong Kong Exchange and priced in Hong Kong dollars (which is linked to a virtually fixed rate against the US$).

 

http://www.investopedia.com/terms/h/hshares.asp

1 China has some inflation at the moment, so I'd want to put any Yuan deposits to work sooner or later.

2 Are there any restrictions on foreigners opening HK$ accounts at present? I know that currency is linked to the US$ at present, but such links do not last for ever.

An online HK trading account with Boom stockbrokers is one thing I've considered. Having a HK bank account might fit well with that, to reduce further currency losses in the long term (when it comes to withdrawal time).

 

I currently have investments in an "China" ETF which is mostly Hong Kong stocks and I have purchased hong Kong stocks though TD Waterhouse. However, they have a thoroughly unreasonable 1.75% currency charge. I need to pay that again to change money back to sterling & withdraw it. Total currency loss 3.5%.

 

For anyone in the UK who wants Asian investments, Aberdeen Asian Smaller Companies Inv Trust (AAS) & Scottish Oriental Smaller Companies Trust (SST) have an excellent record over more than a decade. The current price seems rather high though.

[Guest voldemar]

Couple of weeks ago China allowed offshore renminbi accounts. I was in Singapore just when it happened. In practical terms, everybody can now open such an account (and I opened one with HSBC Singapore). It is now even possible to do it in New York with local branch

of Bank of China. There are pretty unpleasant limitations though. It is impossible to make deposits and withdrawals in Chinese currency. In Singapore I need to deposit funds in any of fully convertible currencies and the bank will exchange it to renminbi and deposit it.

Similar procedure works for withdrawal and exchange rates are not good. On the contrary in HK one can make deposits and withdrawals in renminbi (but there are limitations on how much

is allowed to exchange in Chinese currency). I would like to emphasize that in Singapore there are no such limitations.

In HK it is relatively easy to open HK dollar account with non-local banks (e.g. with Standard Chartered bank it takes twenty minutes). However, do not expect that the peg with US dollar will be over any time soon.

In terms of brokerages, I recommend Interactive brokers which is available in UK. You can trade electronically on HK stock market with very low commissions and exchange rates

will be excellent (it is impossible to beat their spreads). If you want to trade on more exotic Asian markets, it is possible through Singapore brokerages but how do you know how to pick up stocks in Sri Lanka?

In terms of available Asian currencies with reasonable yield, there are not too many choices. I have account in Malaysia but if you want to open one, you need to go there.

The risk is that they can resume capital controls...

[Bob]

Thanks Z, interesting area to consider. I've never played with currency futures but it does appear to me that the Chinese currency ought to appreciate against the US dollar a fair amount in the next 10 years (given the claims by the western governments that the Chinese currency is substantially undervalued and the apparent agreement of China to gradually let it appreciate). I'm not sure as yet how to play it and may end up not doing much of anything.

 

In the past, I used to invest in some mutual funds (Matthews, for one) that specialized in companies in China, India, and other parts of Asia. Those did rather well and I luckily exited that scene before the big drop a couple of years ago. And I suspect they've done fairly well in the last year or so.

[Guest]

Actually, via Hong Kong & London quoted stocks, it seems easier to buy stocks exposed to the Chinese economy than to hold their currency.

Also many commentators suggest the Chinese are understating their current inflation rates.

 

Against that backdrop, I'm inclined to look more toward stockmarket investments that may grow and outperform the inflation rate.

 

I think Jim Rogers was recently suggesting the Reminbi is the only currency to hold, although I've not yet read the full article.

[Guest voldemar]

 

 

Against that backdrop, I'm inclined to look more toward stockmarket investments that may grow and outperform the inflation rate.

 

I think Jim Rogers was recently suggesting the Reminbi is the only currency to hold, although I've not yet read the full article.

In case of rising interest rates (as in China) it is typically not good for stocks but beneficial for currency. Of course, they keep exchange rate artificially low but this is simply not in their interests. Expect rising renminbi soon. Not to mention that in the long run one needs to keep some money in one of the major currencies and in the contest of least ugly Chinese currency wins.

[Guest]

In case of rising interest rates (as in China) it is typically not good for stocks but beneficial for currency. Of course, they keep exchange rate artificially low but this is simply not in their interests.

 

I tend to agree. Perhaps there's a case for cash at the current stage in the Chinese interest rate cycle, but not that much further in the future, it may be time for stocks again.