This week in renminbi: April 24, 2017
GlobalCapital, is part of the Delinian Group, DELINIAN (GLOBALCAPITAL) LIMITED, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 15236213
Copyright © DELINIAN (GLOBALCAPITAL) LIMITED and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement
Asia

This week in renminbi: April 24, 2017

Great_Wall_Monday_230px

In this round-up of news you may have missed over the weekend, People’s Bank of China (PBoC) plans to roll out more SDR-denominated products, State Administration of Foreign Exchange (Safe) says capital flows stabilised in the first quarter of 2017, and JP Morgan is named top foreign asset manager for 2016.

FX:

  • PBoC’s renminbi fix against the dollar was set at 6.8673 this morning, down 150bp from Monday. In the spot market, the CNY was trading at 6.8820 as of 9.36am, with the CNH at 6.8838, up 0.06% and 0.08% from their previous close, respectively, according to Bloomberg data.

  • The dollar index was trading at 99.145 as of 9.26am, down 0.83% from the previous close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 93.70 on Sunday, down 0.3% from its previous close.

  • The trade-weighted index by CFETS closed at 92.98 on April 21, down 0.2% from the previous week, with the BIS basket and special drawing rights basket at 93.96 and 94.71, down 0.2% and 0.6%, respectively.

  • China’s capital flows became more balanced in Q1 of 2017, said a Safe spokesperson on April 20. Speaking at a press conference, the spokesperson noted that foreign reserves have risen for two consecutive months in February and March, and attributed the slowdown in capital outflow pressure to better-than-expected economic growth figures in the first quarter and relative stability of the dollar.

  • The spokesperson added that measures to open up of China’s financial market, such as granting foreign investors access to the FX hedging market in February, will help maintain stability to capital flows in future.

Regulators:

  • Speaking at the international monetary and financial committee (IMFC) meeting in Washington DC on April 21, PBoC governor Zhou Xiaochuan said that the Chinese economy got off to a good start in 2017, with many indicators pointing towards a rebound for the Chinese economy. Zhou also noted that the Chinese government is paying close attention to risk in the financial sector, and is taking measures to reduce risk. Zhou also met with US treasury secretary Steven Mnuchin and IMF managing director Christine Lagarde in Washington.

  • Also speaking at IMFC, PBoC deputy governor, Yi Gang, told delegates that products denominated in SDR basket currencies need to be less reliant on central bank subsidies and more market-driven, noting that that the SDR market currently lacks liquidity and has high costs for settlement and hedging, according to Chinese media.

  • Yi also revealed that China plans to roll out more SDR-denominate products in future. “China hopes to innovate more SDR-denominated products, strengthen our market infrastructure,” said Yi. “Both the World Bank and Standard Chartered issued SDR-denominated bonds in China’s interbank bond market (CIBM) last year. China hopes to further promote and develop liquidity in the SDR secondary market.”

Investment:                                                                                                                

  • JP Morgan has been named the best performing foreign asset manager in China in 2016 by Z-Ben Advisors, followed by UBS and HSBC. Z-Ben’s report assessed each financial institution’s inbound and outbound business activities, and attributed the American bank’s ranking to its establishment of an investment management WFOE, and for maintaining its strong QDII outbound business in 2016. Meanwhile, BlackRock was named number one in inbound business, according to the report, as it continued to be the largest foreign manager in the Greater China fund industry.

  • Unfamiliarity is the biggest drawback for investing in China’s onshore fund market, according to Hong Kong retail investors surveyed by JP Morgan Asset Management. However, the asset manager’s quarterly investor confidence index also noted that 57% of surveyed investors believe that diversification of current investment is a strong driver for investing in China.

  • Speaking at a press conference on April 19, Tai Hui, chief market strategist for Asia at JP Morgan Asset Management, told GlobalRMB that it will take time before retail investors turn more actively to the mainland market, not least because they already have access to it via dual-listing.

  • “For Hong Kong investors, they already have quite a broad selection of Chinese companies they can invest in in Hong Kong, many of them dual-listed [in both markets],” said Hui. “[But] a lot of investors do want to invest in China’s onshore markets because they see this as a good diversification strategy.”

  • Hui also welcomed PBoC’s recent loosening of capital controls , but added that retail investors in Hong Kong will wait and see before increasing their exposure.

  • “That is a very encouraging development. But at the same time, what we’ve seen in the past few years is that, depending on the prevailing of the capital flow conditions, adjustments from the authorities in China, either loosening or tightening,” said Hui. “[Retail investors] want to see how much of a trend this is. They want to build their confidence [and see] how long this relaxation is going to last.”

Settlement:

  • HSBC expects more transactions to be completed in renminbi in Malaysia this year, according to local media. Vina Cheung, global head of renminbi internationalisation at HSBC, argued that Malaysian companies are turning towards renminbi as the ringgit’s value is low, and are using renminbi for settlements with businesses in Hong Kong, Japan and Singapore, as well as mainland China. Malaysia recorded a 27% increase in the commercial payments using renminbi in 2016, according to the report.

Trade:

  • Australia is working towards a free trade agreement (FTA) with Hong Kong, according to Xinhua. The agreement will allow Australian companies to operate in Hong Kong without having on-the-ground operations in the city.

Our most recent stories:


Gift this article