Hong Kong companies flee renminbi

Expect business climate in HK to worsen.

Hong Kong local companies are limiting the use of the renminbi for payments and receivables due to lower expectations of renminbi appreciation and a cautious outlook on business and the economy.

DBS Bank said its DBS RMB Index rose 0.1 point to 55.2 in the second quarter of 2013 from 55.1 in the previous quarter. The slightly higher reading of the index was due to more renminbi customer orders and trade settlement in the past 12 months by current users.

The report said companies are very cautious about the global business and economic outlook, with over half of respondents expecting Hong Kong's general business environment to deteriorate over the next 12 months and more than half expecting their business performance to stagnate.

The cautious outlook and lower expectation of renminbi appreciations may have affected companies' appetite to use renminbi, DBS said.

The percentage of companies surveyed that used renminbi products dropped by almost half in the second quarter, from 26% in the first quarter to only 14%.

Fewer respondents expect the renminbi will appreciate against the U.S. dollars in the next 12 months with more expecting a renminbi depreciation.