Retail renminbi non-deliverable forward contracts will be formally launched on November 9, the Treasury Markets Forum says, adding 16 banks will provide the product.

The forum announced the introduction of the forward contracts in Hong Kong on September 26.

Buyers and sellers of these contracts agree to settle the transaction by making a net payment in a convertible currency - typically the US dollar - proportional to the difference between the agreed forward exchange rate and subsequent spot-fixing rate.

Initially the contracts will be offered in five tenors - one, two, three, six, and 12 months - with a minimum contract size of US$10,000. 

There is an increasing need from small and medium-sized enterprises and other retail customers for such easily accessible financial instruments which can help them hedge their renminbi exposure.

Banks invited to join programme

The 16 participating banks are:

* Bank of China;

* Bank of Communications;

* Bank of East Asia;

* Chiyu Bank;

* Citibank;

* DBS Bank;

* Fubon Bank;

* Hang Seng Bank;

* Hong Kong & Shanghai Banking Corporation;

* Industrial & Commercial Bank of China;

* Liu Chong Hing Bank;

* Nanyang Commercial Bank;

* Royal Bank of Scotland;

* Shanghai Commercial Bank;

* Standard Chartered Bank; and

* Wing Lung Bank.

Eleven banks will launch the product for their customers tomorrow. The remaining five banks will launch the product after completing preparatory work.