FX:
People’s Bank of China (PBoC)’s renminbi fix against the dollar came in at 6.8701 this morning, down by 144bp from Friday. In the spot market, CNY is trading at 6.8741 as of 9:50a.m. , up 0.14% from previous close, with CNH at 6.8583, up 0.21%, according to Bloomberg data.
The strengthening RMB is explained by a falling dollar index, which was trading at 99.325 as of 9.44a.m., down 0.30%. The Thomson Reuters CNY reference index closed at 93.85 on March 26, down 0.3% from previous close. The trade-weighted index by CFETS closed at 92.91 on March 24, down 0.4%, with the BIS basket and special drawing rights basket at 94.07 and 94.87, down 0.5% and 0.3%, respectively.
The volume of transactions in the Chinese foreign exchange market reached Rmb19.65tr in January and February 2017, according to figures released by State Administration of Foreign Exchange (Safe). In February, transactions reached Rmb9.14tr, with Rmb7.47tr taking place in the interbank market and Rmb5.45tr in the derivatives market.
Regulators:
Speaking at the Boao Forum, PBoC governor Zhou Xiaochuan predicted that quantitative easing is coming to an end and that governments will no longer be able to rely on monetary policy alone to stimulate economic growth. Commenting on the cross-border tax proposed by the US, Zhou argued that no tariff arrangement should act as an obstacle to free trade and that the world should accept the reality of globalisation.
Also speaking at Boao , Vice Finance Minister Liu We claimed that China’s debt level is under control, but that local government will need to control their budgets and follow the central government’s borrowing targets strictly, set out in the budget report earlier in March, according to Reuters.
Indices:
Some $12bn of inflows could drive into Chinese A-shares by June 2018, should MSCI include A-shares in its benchmark emerging market (EM) index, according to research by Nomura. MSCI began its consultation on including A-shares on March 23, slashing the number of shares to include from 448 to 169. MSCI will announce its decision in June 2017.
Hubs:
HKEX will introduce five-year China Ministry of Finance Treasury Bond Futures on April 10. HKEX said the new product, with 3% coupon, will meet international investors’ demand for tools to manage renminbi rate risk as China opens up its bond market. This product will be the first offshore futures on domestic Chinese government bonds, according to HKEX.
Net sales of Mainland funds in Hong Kong under the Mutual Recognition of Funds (MRF) scheme went up by 3.8% to Rmb9.74bn in February 2017, with purchases and sales by Hong Kong investors up in the month to Rmb16.49bn and Rmb6.74bn, respectively. Meanwhile, net sales of Hong Kong funds in the Mainland seem to have run out of steam as they saw their fourth consecutive monthly drop – with net sales down by 2.4% to Rmb730.47bn.
On Sunday, Hong Kong elected Carrie Lam as its new chief executive. The former head of the civil service scored 777 votes among the 1,200-strong electoral committee and will swear into office on July 1.