Top stories:
After months of speculation, details are starting to surface about Shanghai free trade zone bonds, with the local municipal authority set to kick-start the market.
The Hong Kong Monetary Authority spoke to GlobalRMB about its plans to make the city an infrastructure financing hub in support of China’s Belt and Road initiative, as well as its continued efforts to promote offshore RMB business.
Recent liberalisations by Chinese authorities mean that RMB bonds will become key for global portfolios, says BlackRock’s Asia head of credit.
The RMB has lost its second place as most used trade finance currency to the euro, according to the latest Swift data.
FX:
The parity rate by the People's Bank of China for onshore RMB against (CNY) the dollar was set on November 25 at a new low of 6.9168, 83bp lower than a day earlier and the lowest level since June 2008. In the spot market, the CNY was trading 0.1% stronger than the previous close at 6.9145 as of 10am, while the offshore RMB (CNH) was trading at 6.9389, also up 0.1%. The Reuters CNH basket index closed on November 24 at 95.15, higher by 0.2% in the session.
In the Russian FX market, Moscow Exchange saw spot trades for the RUB-RMB pair jump by 32% to Rb11.2bn ($174m) in October, according to CEIC data. Volumes in the swaps market for the same pair also saw an increase of 2% to Rb57.9bn.
Bond news:
Foreign banks could soon be distributing Chinese government bonds in China. The deputy director general of China’s department of exchequer, Yang Rui Jin, said in a conference this week that China is seeking ways to improve the investor diversification of its government bonds. And one of the ways he mentioned was to bring in overseas institutions as underwriters for Chinese government bonds. Yang was speaking at the 2016 China Interbank Bond Market Overseas Institutional Investors Conference.
Hubs:
China state media reported on November 22 that the RMB is gaining ground as a trading currency in Latin America. In Argentina, HSBC has seen 1,500 FX operations since it launched RMB trading valued at Rmb500m ($72m).
French law firm Gide said on November 25 that it had advised China’s Bank of Communications on the establishment of its Paris branch. The new entity will support outbound Chinese investment into Europe, the firm said.
MDBs:
The BRICS New Development Bank, headquartered in Shanghai, approved a new batch of project loans in China and India, with one of the projects, an offshore wind power plant, receiving Rmb2bn in financing. NDB issued its first bond in China denominated in RMB last July.
The IMF and the China Securities Regulatory Commission signed a co-operation agreement on November 23, covering areas such as capital market supervision and development, and systemic risk prevention.
FTZ:
Chinese premier Li Keqiang went on a tour of the Shanghai free trade zone (FTZ) on November 21. The state council reported that in the first five months of 2016, 69,177 enterprises were set up in the four FTZs of Shanghai, Guangdong, Tianjin and Fujian.
One of the third batch of FTZs named this year, Liaoning, has setup a working group to consolidate efforts to develop the FTZ. Unsurprisingly, Liaoning governor Chen Qiu Fa is spearheading the task force. The Liaoning FTZ is expected to focus on aviation, logistics and heavy machinery engineering.
The People’s Bank of China made it clear this week that financial institutions are able to use their free trade accounts to provide corporates with foreign currency trade finance services. The Chinese central bank said this will help support the renminbi’s internationalisation and help foreign financial institutions reduce currency mismatches.
On November 21, the PBoC Shanghai branch also announced that private equity funds and projects in the Shanghai FTZ will be allowed to raise capital both in the zone and overseas for cross-border investments, DBS wrote in a report. The central bank also said it will allow two-way RMB pooling services for some manufacturing firms via free trade accounts (FTAs).
RQFII:
The CSRC released the updated list of RQFII licensees on November 24. Two new entities were added in October, Soochow Securities CSSD (Singapore) and Australia's Russell Investment Management. There are now 43 institutions with an RQFII licence awaiting a quota from the State Administration of Foreign Exchange, according to GlobalRMB data.
Shenzhen Connect:
Plenty of development yet the market is still no closer to knowing the exact date for the launch of the long awaited Shenzhen-Hong Kong Stock Connect. The latest development is that both the Shenzhen and Hong Kong bourses will be conducting a full trial on November 26 to mimic a post-launch trading day.
Infographic of the Week:
(Click for full version. Source: China State Council)
