The week in renminbi: US-China dialogue stutters, China bond volumes jump, RMB fix strengthens
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The week in renminbi: US-China dialogue stutters, China bond volumes jump, RMB fix strengthens

Great_Wall_Monday_230px

The US-China dialogue on trade had a muted ending last week, but there was good news in the bond market – domestic issuance picked up in June, and issuers continue to flock to Panda bonds.

Regulations:

  • The National Development and Reform Commission (NDRC) said a new negative list for foreign direct investment will come into force on July 28, cutting the existing list by a third. The negative list details the sectors which are barred from receiving foreign capital.

  • The US-China comprehensive economic dialogue held last week ended without formal announcements by either country. The US and China had previously agreed to a 100-day plan to make progress on trade policies. Some of the achievements so far include China opening up the domestic market to foreign rating agencies, allowing foreign securities firms to hold majority stakes onshore, and opening up the market to beef imports from the US.

Bonds:

  • Onshore bond market issuance was Rmb3.7tr ($549bn) in June 2017, according to data from the National Association of Financial Market Institutional Investors. Treasury bonds amounted to Rmb356.6bn, financial bonds were Rmb266bn, corporate bonds totalled Rmb410.8, and asset-backed securities were worth Rmb26.1bn. The remainder was made up of short term paper issuance.

  • Total transaction volume in the interbank market was Rmb9.2tr, down 19% year on year but up 14.7% from the previous month.

Equities:

  • The use of the northbound net trading quotas under the Shenzhen Stock Connect and Shanghai Stock Connect has averaged Rmb631m and Rmb202m in the month so far, respectively, according to CEIC data. The data is in line with the performance of the schemes in the year so far, with average net trading of Rmb670m and Rmb289m, respectively.

FX:

  • Monday's dollar fix was 6.7410, 5bp stronger than Friday's and the strongest in nine months. The onshore RMB (CNY) spot markets opened at 6.7667, 0.1% weaker than the close, while offshore RMB (CNH) was flat at 6.7580, according to Bloomberg data.

  • The CNY currency indices by China Foreign Exchange Trade System (CFETS) have all dropped in the past week, with the CFETS index down 0.5% to 92.91, the special drawing rights index down 0.3% to 94.13, and the Bank for International Settlements index at 93.84, down 0.5%. The dollar index, meanwhile, was inching 0.05% up to 93.905 at 9.24am.

Our recent coverage:

  • The pipeline for Panda bonds remains busy after Maybank priced its first such deal on Friday, while Hungary is set to price later this week and a number of red chips firms continue to pump out deals.

  • Comment: Chinese authorities have expanded the PBoC's mandate and set up a new commission that could lead to the formation of a super-regulator. While the moves are positive, there are risks to the approach.

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