RMB round-up: PBoC says Chinese banks must compete globally, CSRC promises reform after MSCI inclusion, HKEX plans CNH, USD futures launch on July 10

The governor of People’s Bank of China says Chinese banks must face international competition, the China Securities Regulatory Commission (CSRC) considers changes in Stock Connect daily trading quotas after MSCI’s A-share inclusion, and the Hong Kong Exchange plans to launch CNH and dollar gold futures on July 10.

  • By Noah Sin
  • 23 Jun 2017
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Some of our coverage from a jam-packed week:



FX:


  • PBoC's renminbi fix against the dollar was set at 6.8238 this morning, 41bp weaker than Thursday. In the spot market, the CNY was trading at 6.8495 as of 5.34pm, with the CNH at 6.8377, down 0.28% and flat from their previous close, respectively, according to Wind data.
  • The dollar index was trading at 97.371 as of 4.55pm, down 0.23% from the previous close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 94.20 on Thursday, down 0.16% from its previous close.
  • The trade-weighted index by CFETS closed at 93.24 on June 16, up 0.16% from the previous week, with the BIS basket and special drawing rights basket at 94.22 and 94.76, up 0.24% and 0.19%, respectively.
  • The total transactions in China’s FX market amounted to Rmb12.84tr ($1.87tr) in May, according to monthly figures released by the State Administration of Foreign Exchange (Safe). Transactions in the interbank market made up Rmb10.8tr of this amount. This puts the total FX transactions between January and May at Rmb58.05tr.


Regulators:


  • International competition is good for Chinese banks, said Zhou Xiaochuan, PBoC governor, on June 21. Speaking at the Lujiazui Forum in Shanghai, Zhou said that Chinese financial institutions that are competing with their international counterparts have made major improvements, especially in risk management and anti-money laundering, and that banks cannot expect regulators to shield them from competition.
  • “Protection [of banks] will only cause problems such as laziness, soft budget constraints and rent-seeking, weakening competitiveness and damaging the industry’s development,“ said Zhou. “Our financial market’s development has gained the attention of international bond and EM equity index providers, which demonstrates that financial industry is a competitive service industry, which will benefit from opening up to the outside world, and needs to further open up.”
  • MSCI dropped some stocks from the list of A-shares that entered its EM index due to concerns about trading suspension, according to Fang Xinghai, deputy chair of CSRC. Fang told local media on June 22 that MSCI planned to include 230 A-shares in its negotiation with the Chinese regulators, but dropped the eight stocks because they have been suspended for over 50 days.
  • “A-share stocks love to suspend, [but after A-share inclusion] these companies can’t suspend trading at will,” said Fang.
  • Fang further noted that China will reform its capital markets after A-share inclusion, saying that regulators are considering improving the arrangement of the Stock Connect daily trading quotas, reforming qualified foreign institutional investors (QFII), and other means to deal with problems that arise from large capital flows.


Bonds:

  • Portugal is planning to launch a short-term renminbi-denominated bond in the onshore Chinese market, according to a June 20 media report. Cristina Casalinho, Portugal’s finance minister, said Portugal completed a roadshow in China in late April and early May, and discussed the idea of launching a renminbi bond with Chinese officials.

Derivatives:

  • HKEX is launching its CNH and USD gold futures on July 10, according to an announcement by HKEX on Friday. The bourse said the contracts will be the first pair of commodity futures that can be physically delivered in Hong Kong.
  • Jiao Jinpu, chairman of the Shanghai Gold Exchange (SGE), told the Lujiazui Forum in Shanghai the bourse plans launch a gold futures contract based on the renminbi-backed gold benchmark on the Budapest Stock Exchange in Hungary, according to a June 21 media report. Jiao said the product could emerge as early as H2 2017.

Clearing bank:

Payment:

  • PBoC’s Zhou has said that the second phase of cross-border interbank payment system (CIPS) will be used to promote the use of RMB and One Belt One Road (OBOR), according to a June 21 report by Xinhua. But Zhou did not provide further details, such as a time schedule for the launch, according to the report.

One Belt One Road

  • OBOR projects will not be funded at the expense of the Chinese government, Zhou told a forum in Shanghai on June 21. Zhou said China has managed to use development finance in a financially sustainable way that focuses on long term investment without government subsidies, which is a model that can be duplicated for the development of OBOR.
  • “This model will not take up the government’s financial resources, avoiding the moral hazard and market distortions,” said Zhou. “OBOR will also set the scene for [Chinese] financial institutions to develop abroad.”
  • United Overseas Bank Limited signed two memorandums of understanding to support Chinese companies with OBOR-related projects on June 20, with the Chinese Chamber of International Commerce and the Qingjian Group, a Shandong-based construction conglomerate. The bank said it has so far facilitated investments of more than S$43bn from Chinese companies in southeast Asian markets.
  • By Noah Sin
  • 23 Jun 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 26-Apr-18 Global Logistic Properties via Iowa China Offshore Holdings Hong Kong 1,500
2 26-Apr-18 Trafigura Singapore 500
3 23-Apr-18 CAR Inc Hong Kong 730
4 11-Apr-18 China Jinmao Holdings China 3,000
5 11-Apr-18 Global Logistic Properties via Iowa China Offshore Holdings Hong Kong 1,200

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 33.22
2 HSBC 15.79
3 Bank of Taiwan 5.04
3 Cathay United Bank 5.04
5 Societe Generale Securities Services 4.37

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 04-May-18 Busan Bank South Korea 500
2 27-Apr-18 Central American Bank for Economic Integration (CABEI) Honduras 2,000
3 24-Apr-18 CAR Inc China 350
4 19-Apr-18 Shui On Development (Holdco for Shui On Land) China 600
5 10-Apr-18 Bank of China Taipei Branch (BOC Taipei) China 3,000