HONG Kong's yuan deposits grew at the slowest pace in three months as expectations for appreciation weakened and outflows from the Chinese mainland slowed.

Savings denominated in the Chinese currency rose 2.2 percent to 622.2 billion yuan (US$98 billion) at the end of September from August, said a statement from the Hong Kong Monetary Authority yesterday.

"Demand for the yuan has dropped as fewer investors see it as an attractive investment vehicle," said Nathan Chow, an economist at DBS Bank (Hong Kong) Ltd. "Mainland exporters' increasing use of the yuan for trade settlement also drew some currency back to the mainland from Hong Kong."

He estimates deposits could rise to 700 billion yuan to 750 billion yuan by the end of this year. "Yuan deposit growth in Hong Kong is likely to remain sluggish as expectations for appreciation won't recover and exporters are using the yuan for trade settlement."

Source:shanghaidaily