- Due to the Dragon Boat Festival holiday, the People’s Bank of China has not set a renminbi fix against the dollar this morning. In the spot market, CNY will resume trading on Wednesday, while the CNH was trading at 6.8097 as of 10.12am, up 0.2% from the previous close, according to Bloomberg data.
- The dollar index was trading at 97.496 as of 10.01am, up 0.06% from the previous close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 93.53 on Sunday, up 0.06% from its last close.
- China’s FX market recorded Rmb11.38tr of transactions in April, with Rmb9.55tr of the transactions taking place in the interbank FX market, according to figures released by Safe. This puts the total volume of FX transactions in Q1 at Rmb45.21tr, said the regulator.
- Natixis’ China Capital Flow
trackerprojects capital outflows of $128bn in Q2 2017, based on April data, more than the $95bn of outflows recorded in the first quarter.
- Some $3.35bn worth of Qualified Foreign Institutional Investor (QFII) quotas were given out in May, according to monthly figures released by Safe. Taikang Asset Management (Hong Kong) secured the largest amount, worth $1.36bn, followed by Goldman Sachs International with $300m.
- Essence Asset Management (Hong Kong) and BOB Scotia International Asset Management also scored their first batch of quotas, worth $100m and $200m, respectively.
- Meanwhile, only Rmb1.1bn worth of
renminbiQFII (RQFII) quotas weregiven out in May. Australia’s VanEck Investments, which secured its first RQFII licence in February, is the sole recipient of the quota.
- Renminbi internationalisation is in decline despite China’s effort to promote the use of the currency, according to a May 26 report by Natixis. The report noted that renminbi settlement fell 20% last
year,and that foreign investors are unmoved by China’s efforts to open domestic market access, such as the Stock Connect and RQFII. They held only 0.6% of all renminbi-denominateddeposits and loans, 0.8% of equities and 1.9% of bonds in 2016.
- Moody’s downgrade of China’s credit rating will reduce capital inflows into the Chinese bond market, according to a May 25 report by the Institute of International Finance (IIF). While the immediate impact of the downgrade has been limited, as foreign ownership of the government bond market is less than 2%,
long termfears of further downgrades by other rating agencies will cause a slowdown on portfolio debt flows to China, said IIF.
- The report also reckons the downgrade will impact the long term success of the Bond Connect.
- “We expect lingering concerns over the stability of renminbi and capital controls to continue to weigh on overseas investors’ appetite,” said, Gene Ma, chief economist at IIF and author of the report.
- On May 26, CFETS completed the first write-off of FX options in the interbank market, ending 114 options contracts early, worth a total of $4.06bn. Three foreign banks participated in this exercise, including Citi, DBS and HSBC, joined by 10 Chinese banks, including Bank of China, Bank of Communications and Citic Bank.
- “This is the interbank market’s first options derivatives write-off business,” CFETS said in a statement last Friday. “This is a significant step in perfecting market infrastructure and reducing the overall credit risk of the market.”
- The Dubai branch of Industrial and Commercial Bank of China has been approved by CFETS as a foreign currency lending member, effective May 26, according to an announcement by CFETS.
Belt and Road:
- China made $3.98bn of non-financial direct investment in Q1 2017 into 45 countries along the Belt and Road, including Burma, Indonesia, Malaysia, Singapore and Russia, according to the Ministry of Commerce. This amounts to 15.1% of all non-financial direct investment in the first quarter, up 6.9% from Q1 last year, said a spokesperson.
- The Shanghai Free Trade Zone (FTZ) will set up a service centre to help companies investing in Belt and Road projects. The centre will provide information on customs procedures and technical regulations on countries along the Belt and Road, and rate the quality and credit of companies from those countries.
Our most recent stories:
- PBoC’s new formula to determine the daily renminbi fix, which came to light last Friday, could be a sign of further exchange rate policy reform in China, said HSBC.
- Experts are divided over the impact of Belt and Road on renminbi internationalisation.
- Standard Chartered has become the first non-Chinese bank to close a USDCNY forward trade in Singapore.
- International dollar bonds by Chinese issuers saw a slight widening of spreads on May 24, following Moody’s downgrade of China’s sovereign rating, according to sister publication GlobalCapital Asia.
- Renminbi is now behind the Swiss franc in terms of the share of global payments, according to SWIFT’s RMB tracker.
- Three Panda bonds emerged in the past two weeks. Daimler returned to raise Rmb4bn, China Power New Energy Development Company debuted with a green Panda, and China Citic International Bank became the first financial institution to issue a Panda since November 2016.
- Market participants told GlobalRMB that they are preparing for a July 1 launch of the Bond Connect, and they expect an announcement on which institutions will act as market makers on June 25.
- While the Bond Connect will open up more hedging tools beyond FX for investors in renminbi-denominated assets, it may also create issues for those investing in China via older systems.
- The Moscow Exchange signed an agreement with Shanghai Stock Exchange on May 25 to develop renminbi and Russian rouble-quoted debt and equity products for investors, shortly after MOEX agreed to share real-time data with China’s four largest financial information vendors.