RMB round-up: RMB’s payment usage up, BlackRock eyes China bond inflows

The renminbi’s usage as a global payment currency goes up, BlackRock says full bond index inclusion will drive capital inflows into Chinese fixed income, and foreign ownership of Chinese bonds and equities rise.

  • By Noah Sin
  • 28 Jul 2017
Email a colleague
Request a PDF

Our most recent stories:


  • Panda bond issuance continued its best run of the year this week, with Hungary pricing its Rmb1bn (149m) 4.85% 2020 on July 26. György Barcza, chief executive of the country’s debt management office, told GlobalRMB that the sovereign issuer is hoping to tap the Panda market regularly after the debut deal.
  • China Resources Land priced the Panda market’s biggest deal of the year on July 24, raising Rmb5bn from a dual tranche offering shortly after Longfor Properties debuted in the market with a similarly structured bond. China Gas, which is coming to the market on August 1, will also be selling a dual tranche Panda.
  • Everbright Water also issued its debut Panda bond in the exchange market on July 12, but was forced to compromise by selling a shorter tenor note than it wanted, a source on the deal told GlobalRMB.
  • Nissan’s Chinese joint venture has returned to investors with its latest auto ABS, offering a single tranche worth around Rmb2.52bn ($373.8m).

  • Comment: The Panda market is booming, but there is one group of participants missing – long term investors. Their absence in Panda order books reflect a key risk at the heart of China’s financial system.


RMBi:

  • The renminbi accounted for 1.96% of all global payments in June, up from 1.61% in May, but down from 2.09% a year ago, according to SWIFT’s latest RMB tracker published on July 28.

Investment:


  • Chinese bonds’ full inclusion in the world’s major bond indices will be the catalyst that drives capital inflows into Chinese fixed income, Neeraj Seth, head of Asian credit at BlackRock, said on July 26. Seth, who projected that full inclusion will take place over the next 12-18 months, argued that although China has opened the door to its fixed income market through schemes such as Bond Connect, capital inflows from passive funds will only follow if the major index providers include Chinese bonds in their indices.
  • However, foreign investors seem to be warming up to the asset class. Ownership of Chinese bonds reached Rmb892bn in June, up from Rmb853.4bn in May, according to CEIC data.
  • CEIC data also shows that foreign ownership of Chinese equities went up to Rmb868bn in June, up from Rmb805.38bn in May.


Belt and Road:

  • The PBoC and the European Bank for Reconstruction and Development (EBRD) held a seminar on One Belt One Road (OBOR) in Beijing on July 26, according to the PBoC. Participants discussed how China and the EBRD can strengthen their co-operation, especially on OBOR. The seminar was attended by PBoC deputy governor, Fan Yifei, and the president of Asian Infrastructure Investment Bank, Jin Liqun.

Economy:

  • The State Council has ordered all state-owned enterprises to restructure into either limited liability companies or joint stock firms by the end of this year, our sister publication GlobalCapital Asia reported on July 26. The new order will complete the market reform which started in early 2000s and has already turned 90% of SOEs into corporations, said the report.

FX:


  • The PBoC’s renminbi fix against the dollar was set at 6.7373 this morning, 66bp weaker from Thursday. In the spot market, the CNY was trading at 6.7480 as of 2.46pm, with the CNH at 6.7465, down 0.07% and 0.04% from their previous close, respectively, according to Bloomberg data. The CNY and CNH have taken advantage of a weakening dollar to reach gains of 2.84% and 3.27% in the year so far, respectively.
  • The dollar index was trading at 93.786 as of 2.36pm, down 0.08% from the previous close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 93.62 on Thursday, up 0.04% from its previous close.
  • NEX data launched its EBS FX Benchmarks on July 26, which is a series of 30-minute FX fixings based on actual transactions and orders on its FX trading platform. NEX data will provide fixings for various currency pairs, including USDCNH, EURCNH, CHFCNH, CNHJPY and CNHRUB.
  • The central bank of Turkey has been approved by CFETS as a foreign currency lending member in the onshore FX market effective July 27.


Hubs:

  • Hong Kong’s average daily turnover of FX transactions reached $407.3bn in April 2017, according to a survey by the Treasury Markets Association (TMA). Trading between the dollar and the renminbi was among the most active, making up 16.6% of the total turnover, just behind the dollar and the yen.
  • The TMA also noted that FX swaps, spot and outright forwards made up most of that turnover, recording volumes of $248bn, $88.8bbn and $45.1bn, respectively. Average daily turnover of interest rate derivatives stood at $85.5bn in the same period, with interest rate swaps making up most of that amount, recording a volume of $77.3bn.
  • By Noah Sin
  • 28 Jul 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 36.83
2 HSBC 14.94
3 Bank of Taiwan 4.77
3 Cathay United Bank 4.77
5 Societe Generale Securities Services 4.13

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 23-May-18 QNB Finance Qatar 600
2 16-May-18 First Abu Dhabi Bank PJSC United Arab Emirates 1,100
3 04-May-18 Busan Bank South Korea 500
4 27-Apr-18 Central American Bank for Economic Integration (CABEI) Honduras 2,000
5 24-Apr-18 CAR Inc China 350