Deutsche Boerse steals march on London with new China venture

Thu Oct 29, 2015 8:26am EDT
 
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By Michelle Price and Pete Sweeney

HONG KONG/BEIJING (Reuters) - Two Chinese exchanges and the country's foreign exchange trading operator formally agreed to establish joint ventures with Germany's Deutsche Boerse AG (DB1Gn.DE: Quote) on Thursday.

The deal, signed in Beijing at a ceremony overseen by Germany's Chancellor Angela Merkel and China's Premier Li Keqiang, marks a boost for Frankfurt, which appears to have stolen a march on London in connecting its exchanges to China.

China's foreign exchange operator will establish a 50-50 joint venture with Deutsche Boerse, and the German exchange will also establish a three-way venture with the Shanghai Stock Exchange and China Financial Futures Exchange (CFFEX). The new company will be called the China Europe International Exchange (CEINEX).

CEINEX is set to launch on Nov. 18 with new China cash products including exchange-traded funds and bonds, making it the first dedicated platform for yuan-denominated trading outside mainland China, Deutsche Boerse said.

"CEINEX is a milestone in the strategic cooperation amongst our three exchanges. Its value proposition to 'trade China in international markets' is a major step forward in the internationalization of the RMB," said Deutsche Bourse Chief Executive Officer Carsten Kengeter.

Beijing is trying to improve international perceptions of its financial openness in the run-up to a meeting of the International Monetary Fund to decide whether to include the yuan in its basket of reserve currencies, which would provide a boost to the currency's global status.

One of the complaints of opponents of yuan inclusion is that it is too difficult for foreign investors to get their hands on yuan-denominated financial products outside China due to the country's long-standing capital account restrictions.

The deal is a coup for Deutsche Boerse, which has a strong track-record cross-listing financial products with Asian exchanges in Korea and Taiwan, and which has ambitions to add China's major financial futures to this list.   Continued...