The head of Hong Kong's stock exchange said Tuesday he expects the city will have its first-ever initial public offering in yuan this year, as the exchange seeks to develop products denominated in China's currency to capture growing investor demand.

Hong Kong Exchanges and Clearing's Chief Executive Officer Charles Li couldn't say when it would happen and wouldn't comment on whether any companies had applied to sell shares denominated in yuan, also known as renminbi.

"I personally do believe there will be an IPO of an equity product (in yuan) on the exchange this year," Li said.

China is trying to promote its currency abroad, and Hong Kong is poised to become a major center for so-called "offshore" renminbi trading.

Li said the main obstacle to developing a market for yuan-denominated stocks in Hong Kong is that there is a small pool of the currency available. China keeps tight controls on the circulation of its money abroad.

Hong Kong is a Chinese territory but has its own legal and financial system as well as its own currency, the Hong Kong dollar.

While the amount of renminbi circulating in Hong Kong has been growing over the past year, amounting to about 280 billion renminbi ($42.3 million) in November, it is still only equivalent to less than 5 percent of bank deposits in the former British colony.

With so little yuan available in Hong Kong, investors would not be able to obtain enough of the currency to buy yuan stocks, which would result in a collapse in share price.

The limited supply "dwarfs all the other challenges," Li said, but added that exchange is working on a model aimed at solving the problem. He gave no details.

In a statement, the exchange said it is investigating the feasibility of setting up a renminbi "liquidity pool" to help investors who don't have the currency to buy shares. It's working out foreign currency arrangements with banks and hopes to introduce the pool in the second half of 2011.

Hong Kong's stock exchange topped the list last year for initial public offerings, with companies raising $57 billion in share sales, outpacing its rivals in London and New York.