This week in renminbi: June 26, 2017

People’s Bank of China (PBoC)'s renminbi fix against the dollar was set at 6.8220 this morning, 18bp stronger from Friday. In the spot market, the CNY was trading at 6.8407 as of 12:05pm , with the CNH at 6.8482, 0.04% and 0.17% down from their previous close, respectively, according to Wind data.

The dollar index was trading at 97.271 as of 9.55am, up 0.01% from the previous close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 93.89 on Sunday, down 0.07% from its previous close.

The trade-weighted index by CFETS closed at 93.22 on June 23, down 0.02% from the previous week, with the BIS basket and special drawing rights basket at 94.20 and 94.51, down 0.02% and 0.26%, respectively.

Tradeweb has become the first offshore trading platform to provide Bond Connect services, according to an announcement on Monday. Tradeweb said eligible institutional investors will be able to discover prices, submit orders and trade onshore bonds via Tradeweb in the interbank market (CIBM) once Bond Connect launches. GlobalRMB previously reported that Bond Connect will likely launch on July 3.

“We believe the liberalisation of the Chinese bond market is a landmark event,” said Lee Olesky, CEO of Tradeweb. “We are pleased to be the first trading platform to link to Bond Connect, an offering leveraging the familiar practices already used by foreign investors through Tradeweb across other market places .”

Charles Li, chief executive of the Hong Kong Exchange, said Tradeweb’s international experience makes it a fitting platform provider for the upcoming bond link.

“The extension of the Connect family furthers the goal to connect China’s financial market with the world,” said Li. “Tradeweb’s deep fixed income experience and global client network are key to helping meet the Bond Connect objectives.”

Fund flows under the Mutual Recognition of Funds scheme accelerated in May, according to data released by Safe on June 20. Mainland fund sales in Hong Kong saw overall net sales rise from Rmb11bn ($1.61bn) to Rmb15.3bn. Meanwhile, Hong Kong fund sales in China also saw a rebound, with net overall sales rising from Rmb736.2bn to Rmb850.2bn in the same month.

US president Donald Trump has said that the US is willing to co-operate with China on One Belt One Road (OBOR) projects, according to China’s Ministry of Foreign Affairs. Trump’s comments came during his June 22 meeting in Washington DC with China’s state councillor, Yang Jiechi, during which Yang praised the US’s decision to send a delegation to the Belt and Road Forum on May 16.

China’s Ministry of Finance held a seminar on June 23 on the role of finance in the development of OBOR. Speaking at the seminar, finance minister Xiao Jie said that OBOR has attracted support from the international community, and that the next step of the project must focus on the construction of major economic corridors and the development of a sustainable financing system.

Pan Gongsheng, head of Safe, has said that China will promote favourable FX policies for Chinese companies investing in OBOR projects abroad, according to Xinhua. The regulator made the remarks at an industry seminar on June 22, where he also told participants that cross-border capital flows in and out of China are now largely stable and in equilibrium.

The deputy head of Safe has said that China can use free trade zones (FTZs) to promote OBOR, according to Xinhua. Fang Shangpu said on June 22 the development of OBOR can also prompt further reforms and opening up of the FTZs, but did not specify the kind of changes OBOR could bring.

PBoC published a new batch of interim rules for the Bond Connect, easing FX restriction for foreign investors. Don’t have time to read the rules? We’ve put together a simple guide for you.

MSCI included 222A-share stocks in its emerging markets index on June 21, after three previous rejections. But experts say the small weighting of 0.73% given to A-shares shows that China has a lot of improvements to make in its capital markets. 

Some see MSCI’s move as another case of global institutions bending the rules to appease China, while others believe the inclusion shows that the China glass is half full. But we argue that neither view has much to offer in explaining the Mainland’s growing integration in global financial markets.

No idea what all this MSCI fuss is about? Here's a simple guide for you. Dig deeper by reading our preview of the MSCI decision and analysts' response in the wake of the announcement.

China's Ministry of Finance completed its first offshore renminbi (CNH) bond auction on June 22, surprising analysts with stronger-than-expected demand.

Analysts are expecting capitalinflows to onshore Chinese equities, but their estimates vary and some worry that the pace of active investors' repositioning could put pressure on the already stretched CNH pool.

Meanwhile, banks say that H-shares will rally after the MSCI decision, and bring valuations in the A-share and H-share markets closer, according to sister publication GlobalCapital Asia.

Access programmes such as Bond Connect will act as the catalyst for financial market reform in China, Mark Austen, CEO at Asia Securities Industry & Financial Markets Association ( Asifma ), told GlobalRMB.

While some experts are buoyant on China’s chances of full bond index inclusion after the launch of Bond Connect, others worry that PBoC’s heavy handedness in stabilising the renminbi will hurt its chances.

The Shanghai Stock Exchange has signed an agreement with the Luxembourg Stock Exchange (LuxSE) to launch a green bond index which will provide synchronous quotes in China and Europe, according to GlobalCapital Asia.