The Treasury Markets Association (TMA) is planning to launch the CNH Hong Kong Interbank Offered Rate fixing (CNH HIBOR fixing) in June in the offshore market.

The initial CNH HIBOR fixing will include a variety of tenors including overnight, one week, two weeks, one month, two months, three months, six months and one year. It will be calculated on the basis of the rates contributed by 15 to 18 reference banks that are active in the RMB interbank market.

Dominic Chan, a senior analyst at BNP Paribas, told SRP that the new index will be used as an underlying for structured products in the future. He expects demand to come from institutional investors in Hong Kong, and that similar products will be issued in mainland China as well, with Hong Kong providing the hedging.

"Hong Kong has by far the largest liquidity pool among other offshore RMB centres, and this is the right opportunity to introduce the CNH HIBOR fixing," he said. "This will definitely give Hong Kong a first-mover advantage over other regional offshore RMB business centres, like Singapore or Taiwan."

According to the TMA, as the offshore renminbi (RMB) market in Hong Kong grows, there will be an increasing need for an offshore RMB interest rate benchmark to provide a reference point for financial contracts.

The exact launch date will be announced upon completion of logistics arrangements, including the appointment of the reference banks and the calculating agent.

Peter Pang, chairman of the TMA, said that the introduction of CNH HIBOR fixing "will support the further growth of the offshore RMB loan market by providing a reliable benchmark for the pricing of loan facilities. The fixing will also spearhead the development of the offshore RMB interest rate swap market and assist market participants to hedge the interest rate risk of their RMB business."

As yet, there have been no products linked to interbank indices in the Hong Kong retail market. However, so far this year 63 structured products have been marketed in Hong Kong linked to the interest rate, according to SRP.

Thirteen banks have already agreed to offer the rate, according to TMA statistics.