RMB round-up: Saudi Arabia considers Panda debut, China rolls over Rmb600bn, Li Keqiang pushes for deleveraging
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RMB round-up: Saudi Arabia considers Panda debut, China rolls over Rmb600bn, Li Keqiang pushes for deleveraging

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Saudi Arabia considers issuing its first Panda bond, Ministry of Finance (MoF) plans to roll over Rmb600bn ($90.1bn) of debt by issuing special treasury bonds, and the Chinese premier piles pressure on state-owned enterprises (SOEs) directly owned by the State Council to deleverage more rapidly.

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Pandas:

  • The government of Saudi Arabia is considering selling onshore renminbi-denominated bonds, known as Panda bonds, according to an August 25 media report. Mohammed al-Tuwaijri, vice minister of economy and planning, told a conference in Jeddah that issuing renminbi bonds in China will help Saudi Arabia diversify its funding channels.

    “We will be very willing to consider funding in renminbi and other Chinese products,” said al-Tuwaijri. “We will also access other technical markets in terms of unique funding opportunities, private placements, panda bonds and others.”

    The report also noted that Industrial and Commercial Bank of China has expressed an interest in sponsoring Saudi Arabia, should the sovereign issuer decide the tap the Panda market. It is only one sign of a growing cooperation between the two countries. Saudi Arabia and China are also planning to team up for a $20bn fund.

Bonds:

  • China is rolling over Rmb600bn of debt by issuing a special treasury bond, according to the Ministry of Finance on August 22. The MoF will sell a Rmb400bn seven-year tranche at a coupon 3.6% and a Rmb200bn 10-year tranche at 3.62% in the interbank bond market. An August 22 media report said the soon-to-be-due debt was raised to establish China’s sovereign wealth fund in 2007.

    The issuance will not affect interbank liquidity as the PBoC is set to purchase all the bonds on the day of issuance, Xu Zhong, head of the PBoC’s research bureau, said on August 22.

    The interbank bond market recorded a daily average trading volume of Rmb436.4bn in July, down 20.5% year-on-year and up 4.6% quarter-on-quarter, according to the PBoC. Meanwhile, the exchange market recorded an average daily trading volume of Rmb21.3bn in the same period, up 3.7% year-on-year and down 11.2% quarter-on-quarter.

Economy:

  • SOEs owned by the State-owned Assets Supervision and Administration Commission of the State Council – commonly known as central SOEs – should more rapidly deleverage as their profit grows, premier Li Keqiang said on August 23.

    Li noted that central SOEs’ profits rose by 16.4% year-on-year in the first seven months of 2017, and said this would allow central SOEs to pay down their debt at a faster pace.

    “We should seize this opportunity – as central SOEs turn losses into profits – to deleverage in a stable manner, and help the macro economy to grow sustainably, steadily and healthy,” Li said at a State Council meeting.

    The meeting came after the State Council published a set of guidelines on August 18 governing the scope of overseas acquisitions by Chinese companies.

Regulators:

  • Lin Xiaoxuan, China Minsheng Bank’s chief information officer, is under investigation by China Banking Regulatory Commission for an alleged violation of discipline, according to an August 22 statement by the regulator. The banking regulator did not give any more detail on the investigation.

Hubs:

  • Hong Kong Exchanges and Clearing (HKEX) signed a Memorandum of Understanding (MOU) with the Sichuan Provincial Government on August 24. The MOU will strengthen cooperation between the two parties and help promote the development of capital and commodities markets in Hong Kong and Sichuan, according to HKEX.

Clearing banks:

Payments:

FX:

  • The PBoC’s renminbi fix against the dollar was set at 6.6579 this morning, 54bp weaker from Thursday. The NEX CNH benchmark came in at 6.6588 at 4.31pm on Thursday, down from 6.6655 on Wednesday.

    The dollar index closed at 93.277 on Thursday, down 0.14% from Wednesday, according to Bloomberg. The Thomson Reuters CNY reference index closed at 94.73 on Thursday, down 0.12% from its previous close.

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