This week in renminbi: May 29, 2017

China’s FX market records Rmb11.38tr ($1.65tr) of transactions in April, the State Administration of Foreign Exchange releases more foreign investment quotas, and CFETS completes first options write-off in the interbank market.

  • By Noah Sin
  • 29 May 2017
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FX:

  • 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.

Capital flows:

Quotas:

  • 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 renminbi QFII (RQFII) quotas were given out in May. Australia’s VanEck Investments, which secured its first RQFII licence in February, is the sole recipient of the quota.

RMBi:

  • 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-denominated deposits and loans, 0.8% of equities and 1.9% of bonds in 2016.

Credit rating:

  • 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 term fears 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. 

Derivatives:

  • 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.”

Clearing bank:

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.

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  • By Noah Sin
  • 29 May 2017

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 China Merchants Securities Co 21.76
2 Agricultural Bank of China (ABC) 15.11
2 CITIC Securities 15.11
4 China CITIC Bank Corp 13.60
5 Industrial and Commercial Bank of China (ICBC) 10.58

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 09-May-18 Daimler Germany 5,000
2 26-Apr-18 Global Logistic Properties via Iowa China Offshore Holdings Hong Kong 1,500
3 26-Apr-18 Trafigura Singapore 500
4 23-Apr-18 CAR Inc Hong Kong 730
5 11-Apr-18 China Jinmao Holdings China 3,000

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 35.60
2 HSBC 15.23
3 Bank of Taiwan 4.86
3 Cathay United Bank 4.86
5 Societe Generale Securities Services 4.21

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 16-May-18 First Abu Dhabi Bank PJSC United Arab Emirates 1,100
2 04-May-18 Busan Bank South Korea 500
3 27-Apr-18 Central American Bank for Economic Integration (CABEI) Honduras 2,000
4 24-Apr-18 CAR Inc China 350
5 19-Apr-18 Shui On Development (Holdco for Shui On Land) China 600