This week in renminbi: February 20, 2017
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This week in renminbi: February 20, 2017

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PBoC opened the week with a near-300bp weakening of the dollar fix, while Rusal received the green light for its upcoming Panda bond deal, and the Shanghai-London Stock Connect is now one step closer to becoming reality.

FX:

  • The first dollar fix of the week by PBoC came in at 6.8743, 287bp weaker than Friday’s. The spot market opened slightly stronger, however, with the onshore RMB (CNY) up 0.05% at 6.8677 and the offshore RMB (CNH) flat at 6.8470 as of 10:50am , according to Wind data.

  • CFETS said the trade-weighted currency index ended last week at 94.21, 0.2% higher than a week earlier. The special drawing rights basket, meanwhile, was up 0.4% to 95.92 and the Bank for International Settlements index was up 0.2% to 95.48. The Thomson Reuters CNY reference index was unchanged in the week, ending at 94.98.

Markets:

  • Capital outflow pressure seems to be abating for China, based on the country’s latest figures for January 2017. Data from the State Administration of Foreign Exchange (Safe) revealed that the banking sector’s net FX sales and purchases were still in negative territory, standing at $19.2bn for the month. Yet, the situation was already much improved from previous months as the gap has narrowed by 64% in December 2016 and 77% year-on-year. But Safe also pointed out that there were still plenty of global macro concerns, which could lead to spikes in short-term volatility.

Bonds:

  • Russian aluminium producer Rusal’s Rmb10bn Panda bond programme has been approved by the Shanghai Stock Exchange (SSE), according to an SSE statement last Friday. Rusal is required to make the first drawdown within the next 12 months with CICC to act as main underwriter and sole bookrunner. Rusal is rated AA+ by China Chengxin International. The SSE added that one of the key reasons for approving the programme was because bond proceeds will be used to promote China’s Belt and Road initiative and deepen Sino-Russian ties.

Hubs:

  • Andrew Parmley, Lord Mayor of the City of London, told a press briefing on February 17 that plans for the Shanghai-London Stock Connect were making progress, following the feasibility studies conducted over the past two years.

    “There is some amount of progress but not as much as we’d like,” said Parmley. “We have moved in the second phase of discussions and there is widespread support in government, in the City of London and the London Stock Exchange. All the signs are good.”

    Parmley told GlobalRMB that progress under the banner of the ‘Golden Era’ relationship between the UK and China was now targeting the Belt and Road Initiative.

    “The Chinese ambassador to the UK reiterated we are in the Golden Era and that London is the number one partner for China [in Europe],” he said. “We’d like to think that London is on the Western end of the Belt and Road. We intend on having a presence in the [Belt and Road] summit being held this year.”

  • PSCB Bank opened RMB correspondent accounts with Bank of China Frankfurt Branch (BoC Frankfurt), the Russian lender said in a February 18 statement. PSCB said it took the step to service its clients engaged in trade with China, The bank added that it had been recognized by the Moscow Exchange as a regional leader in RMB trading in 2015 and 2016. PSCB has also had CNY correspondent accounts with BoC Moscow branch since 2009.

  • Malaysian enterprises are stepping up use of the RMB for trade as the dollar continues to strengthen against most currencies while the RMB depreciates, according to a February 19 local media report. The article noted that Malaysian importers can save as much as 14% on their invoices by paying in RMB instead of dollar , combining the weakening of the RMB with the ability to remove FX costs to the transactions. The RMB lost 3% against the ringgit in 2016, according to Wind data. 

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