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This week in renminbi: Nov 14, 2016

By Rev Hui
14 Nov 2016

In this new Monday round-up from GlobalRMB, we bring you a collection of market and regulatory developments from the weekend as well as provide a preview of upcoming events this week.

FX news:

  • Direct trading between the renminbi and the Canadian dollar on China’s interbank FX market started on Monday. As part of the landmark development, the formation mechanism of the central parity rate for CAD/RMB will also be changed. China Foreign Exchange Trade System (CFETS) will collect quotations offered by market makers before the start of each trading day and the average of those prices will become the new central parity rate. Previously, the CAD/RMB central parity rate was calculated via the combination of USD/RMB central parity rate and the exchange rate of the US dollar against the Canadian dollar.
  • The central parity rate for the dollar-onshore RMB (CNY) for has been fixed at 6.8291 on Monday morning as the dollar’s momentum shows little sign of slowing down. OCBC economist Tommy Xie wrote in a note that the next psychological level will be Rmb6.82-Rmb6.84 as that was the level China pegged for almost two years following the outbreak of the Lehman crisis.
  • The CFETS RMB basket index ended at 94.33 on November 11, 0.5% higher than the previous week despite the RMB’s losses against the dollar. The Bank for International Settlement index saw the strongest gains, up 0.9% to 95.51 in the week, while the basket based on the IMF special drawing rights was up 0.2% to 95.11.

Big data:

  • The People’s Bank of China has put out its financial statistics report for October. The total volume of RMB cross-border trade settlement stood at Rmb368.1bn ($54.3bn) whereas RMB settlement related to foreign direct investments amounted to Rmb108.1bn. RMB settlement the result of outbound investments was Rmb87.1bn.

FTZ news:

  • China’s vice minister of commerce, Wang Shouwen, said in a press conference last week that his department is collaborating with the various local governments to finalise the details for the upcoming batch of free trade zones located in Chongqing, Henan, Hubei, Liaoning, Sichuan, Shaanxi and Zhejiang. Areas yet to be firmed up include the exact scope of each FTZs such as which industries would be ‘open up.’

Investment news:

  • The Hungarian central bank is advising its fund industry to put the country’s Rmb50bn renminbi qualified institutional investor (RQFII) into better use. The central bank put out a report (in Hungarian) on the benefits and opportunities that could arise from investing in onshore Chinese securities via RQFII although it remains to be seen whether any Hungarian investor would do so.  No asset manager has received a licence. since the country was awarded the aggregate Rmb50bn quota last year.
  • Onto an area that is gaining plenty of traction, one of the world’s largest hedge fund managers, Bridgewater Associates, has gained regulatory approval to establish a wholly-owned investment business in China, according to Z-Ben Advisors. Bridgewater is looking to trade fixed income securities through CIBM and is the first global hedge fund manager to gain access into CIBM.

Shenzhen Connect news:

  • The Shenzhen Stock Exchange (SZSE) and the Hong Kong Stock Exchange (HKEX) is holding a joint roadshow on Friday on the upcoming Shenzhen-Hong Kong Stock Connect scheme. The event will be held in the Shenzhen Stock Exchange and will be attended by HKEX CEO Charles Li and SZSE president Wang Jianjun. The link is widely expected to launch on November 21
By Rev Hui
14 Nov 2016