This week in renminbi: March 20, 2017

China Banking Regulatory Commission (CBRC) relaxes restrictions on foreign banks, China sees first net capital inflow in almost three years, and Goldman Sachs estimates $54bn of southbound flows to Hong Kong via Stock Connect by the end of 2017.

  • By Noah Sin
  • 20 Mar 2017
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FX:


  • People’s Bank of China (PBoC)’s onshore renminbi (CNY) fix against the dollar came in at 6.8998 this morning, up 125bp from March 17. As of 9:30am, CNY is trading at 6.9100, down 0.17% from the previously close, with CNH (offshore renminbi) at 6.8907, down 0.06%, according to Bloomberg.
  • The dollar index is down 0.07% from Friday, trading at 100.230, according to Bloomberg. The Thomson Reuters CNY reference index closed at 94.10 on March 19, down 0.20 points from March 17. The trade-weighted index by CFETS closed at 93.32 on March 17, down 0.91 points, with BIS basket and special drawing rights basket at 95.50 and 95.14, down 1.02 and 0.53 points, respectively.
  • PBoC will inject Rmb60bn into the money markets through seven-day reverse bond repurchase agreements, Rmb20bn through 14-day reverse repurchase agreements (repos), and an additional Rmb20bn through 28-day reverse repos, according to Reuters.
  • In February, China experienced a net capital inflow for the first time in three years, according to Capital Economics' report published on March 17. The consultancy attributed this phenomenon to tightening capital controls by PBoC, upbeat economic data, and dwindling concerns about renminbi’s depreciation.
  • Meanwhile, Natixis observed that renminbi is experiencing a rebound from early January. In a report published Monday, the French bank argued that a more hawkish Federal Reserve and a stronger US dollar have put both CNY and CNH under depreciation pressure in February.


Bonds:

  • China will actively seek to issue more green bonds, according to the country’s environment minister. At the China Development Forum in Beijing on March 19, Chen Jining suggested that financial products, such as green bonds, credit and insurance can help, not hinder, China’s economic development.

Regulators:


  • On March 18, CBRC relaxed licensing rules for foreign banks to underwrite treasury bonds, and offer custodian and financial advisory services without prior approval. In an online announcement, CBRC said the move will form part of China’s “One Belt One Road” strategy, and hoped that foreign banks will help Chinese companies issue bonds, conduct IPOs and M&A overseas. In addition, the change will also allow foreign banks to invest in Chinese banks and financial institutions.
  • PBoC governor Zhou Xiaochuan said China’s financial system is in good health overall, but the high leverage ratio, risks from shadow banking, debt and property markets still pose risks to the economy. Zhou made the remarks at a BRICS finance ministers and central bank governors’ meeting in Germany on March 17. China will chair the BRICS leaders’ meeting in September this year.
  • Cross Border Interbank Payment System (CIPS) announced that 10 financial institutions, including Agricultural Bank of China’s Dubai branch, have been approved as renminbi cross-border payment system’s indirect participants, effective as of March 17.


Stock Connect:

  • Southbound flows via the Shanghai- and Shenzhen-Hong Kong Stock Connect will increase by $32bn to $54bn this year, said Goldman Sachs’s chief China strategist, Kinger Lau. According to local media, the Wall Street bank argued that long-term asset diversification demand is in the rise as China’s per capital income continues to grow, bringing more capital to Hong Kong.

  • By Noah Sin
  • 20 Mar 2017

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 CITIC Securities 30.19
2 China CITIC Bank Corp 12.38
3 Bank of China (BOC) 11.61
4 Everbright Securities 10.84
5 China Merchants Bank Co 10.06

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 02-Aug-17 China Gas Holdings China 1,500
2 26-Jul-17 Hungary Hungary 1,000
3 24-Jul-17 China Resources Land China 5,000
4 21-Jul-17 Everbright Water China 1,000
5 21-Jul-17 Maybank Malaysia 1,000

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 JP Morgan 49.70
2 Barclays 10.06
2 Citi 10.06
2 HSBC 10.06
2 Bank of China (BOC) 10.06

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 01-Jun-17 Ocean Wealth (Parent: China Orient Asset Management) China 632
2 11-Apr-17 Bank of China Johannesburg Branch (BOC Johannesburg) China 1,500
3 22-Feb-17 Ocean Wealth (Parent: China Orient Asset Management) China 850
4 28-Nov-16 Loncin Holdings China 800
5 04-Nov-16 China Nuclear Engineering Group China 1,500