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Just a couple of days before the expected launch of Bond Connect, the China Foreign Exchange Trade System (CFETS) surprised some market participants by announcing on June 22 that foreign investors can now settle on a T+2 basis in the interbank bond market (CIBM).
Regulators provided some more clarity on Bond Connect earlier this week by naming Tradeweb as the first trading platform provider for the link. Meanwhile, analysts remain divided over whether regulators will impose aggregate trading quotas.
RMB regained its position as the sixth most used global payments currency in May, but remains in a tight race with the Swiss franc, according to SWIFT data.
What difference does 0.73% make? Quite a lot. We argue that MSCI’s A-share inclusion will open a new chapter in the long journey to RMB internationalisation.
Rusal’s deputy CEO told GlobalRMB that high yields in the onshore bond market are putting the company’s plan for a second Panda bond on hold.
Bank of China Group Investment debuted in the Panda bond market on June 23, sealing the second financial Panda bond of the year.
Hong Kong Exchanges and Clearing and the Chinese Gold and Silver Exchange Society (CGSE) signed a memorandum of understanding on June 22 to co-operate on product promotions, sister publication GlobalCapital reports.
FX:
People’s Bank of China's RMB fix against the dollar was set at 6.7744 this morning, 196bp stronger from Thursday. In the spot market, the CNY was trading at 6.7799 as of 4.38pm in Hong Kong, with the CNH at 6.7835, up 0.1% and 0.15% from their previous close, respectively, according to Bloomberg data.
The dollar index was trading at 95.706 as of 4.26pm, up 0.08% from the previous close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 94.36 on Friday, up 0.01% from its last close.
Regulators:
China is exploring the possibility of introducing equity derivatives in Hong Kong, deputy chairman of CSRC, Fang Xinghai, said on Monday.
Speaking at a joint forum organised by the Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZE) and MSCI, Fang said that following MSCI’s A-share inclusion, CSRC is exploring ways to help foreign investors manage risk when investing in Chinese equities. But he added that new derivatives products must not affect the stability of the Chinese financial system.
China’s outstanding foreign debt amounted to Rmb9.92tr ($1.44tr) as of the end of March, according to figures released by the State Administration of Foreign Exchange (Safe) on Friday. About 82% of China's foreign currency debt was denominated in dollars, 7% in euro, 3% in Japanese yen and 8% in SDR and other currencies.
Indices:
Citi is planning to launch two Chinese bonds indices, the bank said on Friday. The first, the Citi Chinese Broad Bond Index, will measure the performance of the entire onshore bond market, across government, agency and corporate sectors, whereas the second index will focus on tracking the CIBM.
Citi said the indices will provide a benchmark for international investors seeking to enter the Chinese fixed income market via CIBM Direct or the upcoming Bond Connect.
HKEX is considering launching a Belt and Road equity index, according to an announcement on June 28. Working with China Exchanges Services Company Limited (CESC), a joint venture between HKEX, SSE and SZE, HKEX will seek to launch an index composed of companies whose shares can be traded through Stock Connect and which are involved in the Belt and Road Initiative.
“As an international financial centre and the most mature offshore RMB market, Hong Kong will play an important role in the Belt and Road Initiative," said Charles Li, HKEX’s chief executive. "A stock index would be a good way to start helping investors who are seeking exposure to companies with Belt and Road investments."
Equities:
Speaking at the joint event by MSCI, SSE and SZE on Monday, MSCI’s CEO Henry Fernandez said that MSCI will include more mid-cap companies in its indices in the future, to let international investors share the profits of Chinese new economy stocks, according to a social media post by the SSE.
ETFs:
An A-share related index on the Singapore Exchange — the db x-trackers MSCI China Index UCITS ETF — has been named the best performing ETF on the SGX so far in 2017. The ETF has generated total returns of 20% and a turnover of S$25.1m year-to-date, according to figures released by the bourse on Friday.
Hubs:
The government of Hong Kong signed two investment agreements with China’s Ministry of Commerce (MofCom) on June 28, which will commit the Mainland to provide Hong Kong investments and investors with national treatment, putting them on an equal footing with their Mainland counterparts, except for the 26 measures listed in the agreements. Hong Kong will also have more preferential investment access than other external investors in certain sectors.
Ashley Alder, CEO of Hong Kong’s Securities and Futures Commission (SFC), said the agreements, which were signed under the Closer Economic Partnership Arrangement (CEPA) framework, could help expand mutual market access schemes between Hong Kong and Mainland China.
"The enhancements of CEPA will promote economic and technical co-operation between the two markets,” said Alder. “We will work very closely with our Mainland counterparts to establish the necessary regulatory framework to implement the initiatives under the agreements."
Bank of China opened its first branch in Ireland on June 28. Located in Dublin, the branch will provide services ranging from FX and international settlement to trade finance, according to an announcement on Wednesday.
On Thursday, BOC launched a debt capital market distribution centre in Singapore. BOC said the new centre will help businesses in the region enter China’s onshore market, and the lender will provide Panda bond underwriting services.
Payments:
The Hong Kong Monetary Authority (HKMA) and PBoC’s Guangzhou branch launched a cross-boundary electronic bill presentment and payment (EBPP) between Hong Kong and Guangdong province on June 27. The channel will allow customers in Hong Kong make payments to merchants in Guangdong in RMB via internet or mobile banking platforms.
Clearing bank:
The Hong Kong branch of China Everbright Bank has been approved by CFETS as a foreign currency lending member effective July 3.
Separately AP2, one of Sweden’s five state pension funds, has also been approved by CFETS as a foreign currency lending member, effective June 30.
FTZ:
International Enterprise Singapore has signed an MoU with the Chengdu free trade zone to help Singaporean companies to expand their operation in the FTZ. The June 28 MoU will commit both parties to promoting financial services, especially company listing and risk assessment, and trade and logistics services.
Derivatives:
Everbright Photon, a subsidiary of Everbright Futures, appointed Horizon Software as its core trading technology for the new commodity options markets.
Jingbo Dong, president of Everbright Photon, said the decision will prepare the company for the launch of the two new options markets in China — the Dalian and Zhengzhou Commodity Exchanges.
“Everbright Photon has been preparing for the launch of the two options markets, and as part of this we needed to find a trading system,” said Dong. “It was clear to us that a sophisticated trading system would be key for our market making business and essential for providing the highest level of service to our clients.”
Trade:
Chinese premier Li Keqiang said foreign companies are welcome to participate in M&A deals in China. Speaking at the summer Davos forum on June 28, Li said China’s reform and opening up requires the support of foreign businesses and capital, and that China will continue to lower the barrier for foreign investors to enter its market.