HONG KONG: The pace of yuan appreciation may speed up from the second quarter of next year, boosted by the strong recovery in the country's exports and the resurgent influx of foreign direct investments, CITIC Ka Wah Bank said yesterday.

The bank expects renminbi to remain relatively stable in the coming six months, yet the currency may encounter pressure to jump, as the export trading with the US and Europe starts to pick up amid the global economic recovery.

"We believe the central government will allow its currency to appreciate gradually, with a 3 to 5 percent upswing from now until the end of 2010," said Liao Qun, chief economist and senior vice president of CITIC Ka Wah Bank.

Liao noted that it is worth investing in the mainland real estate and stock markets in the long term, in light of the country's strong economic growth.

"GDP growth on the mainland may surge to almost 9 percent in the third quarter, while advancing to over 9 percent in the fourth quarter," he said, adding that the country's overall GDP growth may amount to as much as 8.3 percent in 2009.

CITIC Ka Wah Bank also expects the demand for and market interest in renminbi investment and deposit products to continue increasing, benefiting from the long term appreciation potential of renminbi.

Zoe Lau, CITIC Ka Wah's senior vice president and head of wealth management and consumer finance, said the bank will offer a 2.4 percent time deposit rate for their customers' renminbi savings, hoping to double the bank's yuan deposits by the end of 2009.

"Renminbi accounts currently account for only around 1 percent of our total deposit base; we hope the high-interest yuan time-deposit products can keep expanding our renminbi deposits in the future," Lau said.

She added that the bank may launch more Renminbi structural deposit products in the near team, taking advantage of the foreseeable currency appreciation.

"The renminbi time-deposit saving can help our customers to expand their yuan savings in a period of time, so that they will have enough currency for their future investment in the yuan products," Lau said.

Woody Chan, executive vice president and treasurer of CITIC Ka Wah Bank, also believes that more yuan structural products will be available in the Hong Kong market, following the upsurge in renminbi liquidity.

"If the renminbi deposit is significant enough, it can be used as the settlement currency for the mainland companies to conduct initial public offerings in Hong Kong," Chan said.

(HK Edition 10/22/2009 page4)