This week in renminbi: January 9, 2017

The People’s Bank of China (PBoC) went into reverse gear on Monday, weakening the dollar fix by 0.9%, China’s foreign currency reserves cling on to the $3tr level, and Shenzhen Connect sees slow but steady foreign interest.

  • By Paolo Danese
  • 09 Jan 2017
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FX:

Another surprise came from PBoC on Monday as the RMB fix reversed course with a 594bp weakening against the dollar to 6.9262. On Friday, the PBoC had set the fix 639bp stronger at 6.8668. The lower fix came despite the dollar index trading slightly weaker at 100.200.

In the spot market, the onshore RMB (CNY) was trading at 6.9330 at 9:36am Hong Kong time, down 0.13%. The offshore RMB (CNH) was still trading stronger than the CNY at 6.8702, but was also down 0.30% on the previous close.

The new trade-weighted currency index by CFETS closed 0.4% higher at 95.25 on January 6, with the other two reference indices — one based on a Bank for International Settlement (BIS) basket and the other based on the special drawing rights (SDR) basket — also slightly up to 96.63 and 96.07 respectively.

The Thomson Reuters reference CNY index (RXY CNY) was up 0.25% to 95.51 as of 9:10am on Monday. 

The State Administration of Foreign Exchange (Safe) laid out its primary objectives for 2017 in a FX management meeting in Beijing last week. Safe said it will continue to push regulatory reforms, strengthen supervision work, and improve its cross-border capital management framework and the country’s FX reserves management.

Reserves:

Despite expectations of another sharp drop in China’s foreign exchange reserves due to strong capital outflow pressure and central bank interventions to stabilise the currency, the drop for the month of December was $41bn to $3.01tr.

Tommy Xie, economist at OCBC Bank, wrote on Monday that the December decline was due to both valuation effects and capital outflows. He added that FX reserve had also fallen by 0.4% in SDR terms from SDR2.25tr to SDR2.24tr.

China’s authorities attributed last year’s $319.8bn drop in FX reserves to PBoC’s efforts to keep the renminbi relatively stable against a strengthening dollar, according to a statement published by Safe over the weekend. In addition, a strengthening greenback has caused a drop in valuation of non-dollar assets, which also prompted a fall in FX reserves for China. However, the Chinese central bank pointed out that the decline recorded in 2016 was significantly lower than the Rmb512.7bn ($74.3bn) drop in 2015.

Exchanges

The Hong Kong Exchange (HKEX) said in a monthly report that the average daily turnover of RMB Currency Futures throughout 2016 was 2,206 contracts — up 108% compared to 1,062 contracts in 2015.

USDCNH futures reached a record high open interest of 45,635 contracts as of December 30, HKEX added.

The Shenzhen-Hong Kong Stock Connect launched in early December saw average daily southbound flows of Rmb388m, 3.7% of the daily quota, while northbound flows averaged Rmb910m, 7% of the daily quota.

FTZ

The General Administration of Customs (GAC) is looking to boost foreign investment into China via the development of free trade zones, Li Guo, vice-minister of GAC, said in a State Council policy briefing on January 6.

Out of the latest 60 measures introduced by the GAC to facilitate trade, 50 were first launched in Shanghai FTZ, Li said. New measures are now being looked at to support the third batch of FTZ in seven additional provinces and cities approved last year.

Bank news:

UniCredit’s Shanghai branch successfully joined China’s onshore interest-rate swap market, signing an agreement with the regulators last week. 


  • By Paolo Danese
  • 09 Jan 2017

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 Bank of China (BOC) 28.15
2 CITIC Securities 21.52
3 China CITIC Bank Corp 9.93
4 China Merchants Bank Co 9.38
5 Industrial and Commercial Bank of China (ICBC) 7.73

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 13-Oct-17 Global Logistic Properties Singapore 1,000
2 19-Sep-17 Skyworth Digital Holdings China 2,000
3 14-Sep-17 Bank of China (Hong Kong) (BOCHK) China 9,000
4 05-Sep-17 Joy City China 1,000
5 01-Sep-17 Rusal Russian Federation 500

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 37.58
2 JP Morgan 18.57
3 HSBC 16.29
4 Credit Agricole 12.53
5 Barclays 3.76

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 19-Oct-17 Commonwealth Bank of Australia (CBA) Australia 1,500
2 11-Oct-17 BMW Finance NV The Netherlands 1,000
3 11-Oct-17 BOC Aviation Singapore 1,000
4 28-Sep-17 National Bank of Canada Canada 600
5 22-Sep-17 Royal Bank of Canada Canada 900