Chinese stocks jump on yuan payments for Hormuz transit fees
What's the story
Shares of Chinese firms facilitating cross-border payments have witnessed a significant surge after the news of the yuan being accepted for toll payments in the Strait of Hormuz. The development is seen as part of China's efforts to internationalize its currency and attract more global investments amid ongoing conflicts in Iran. Companies like CNPC Capital, Lakala Payment, and Shenzhen Forms Syntron Information have all reported gains up to 10%.
Market response
CNPC Capital hits upper circuit in Shenzhen
CNPC Capital, the financial arm of China National Petroleum Corp., hit the 10% upper circuit in Shenzhen. Lakala Payment also witnessed a major jump, rising by as much as 7.9%. Fintech firm Shenzhen Forms Syntron also gained by 9.4% before paring gains. The shares of these companies closed higher today with CNPC Capital up by 8%, Lakala Payment and Shenzhen Forms Syntron ending nearly 1% higher each.
Currency acceptance
China's long-standing effort to internationalize its currency
The acceptance of the yuan for toll payments in the Strait of Hormuz is seen as a major step in China's long-standing effort to internationalize its currency. A recent report from Lloyd's List revealed that ships are paying millions of dollars (about $1 per barrel) in fees to Iran for using this crucial energy shipping route, with these fees being settled in yuan. A very large crude carrier (VLCC) generally has a capacity of around two million barrels.
Investment shift
Shen Meng's insights on the yuan's growing prominence
Shen Meng, director at Beijing-based investment bank Chanson & Co, has said that the yuan is becoming a major alternative for global investments due to China's close relationship with Iran. He also noted that industries related to oil and gas capital firms and electronic payment companies are likely to see increased capital inflows as a result of this development.