RMB round-up: PBoC eases liquidity, Stock Connect turns three, Neuberger Berman nabs PFM licence

The People's Bank of China (PBoC) conducted its largest weekly liquidity injection since January, the Stock Connect scheme celebrates its third anniversary this week, the Chinese authorities have extended a capital gains tax waiver, and Neuberger Berman was granted a private fund management licence for its China operation.

  • By Paolo Danese
  • 17 Nov 2017
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Bonds:

  • The PBoC intervened in the onshore market by significantly boosting the money supply with a reverse repo operation of Rmb690bn on Friday, bringing the total for the week to Rmb1.15tr, the highest level of reverse repo operations since the third week of January this year, when it injected Rmb1.38tr. (China's central bank defines repurchase agreements in the opposite way to international norms, with repos draining liquidity and reverse repos adding liquidity to the market.)
  • Onshore government bond yields have been spiking as the deleveraging campaign is squeezing investors onshore. Ten year Chinese government bond yields hit a fresh high for the year at 3.94% on November 16 and were trading at 3.92% at 11am on Friday, recovering on the back of the liquidity injection.

Investment:

  • Stock Connect marks its third birthday on November 17, the date on which the Shanghai arm of the link was launched in 2014. The exchange said in a release the channel has seen healthy growth in trading flows.
    As of October 31, total southbound trading has hit HK$3.327tr, with net inflows of HK$637.5bn. The amount of local stocks held by Mainland investors has doubled from the end of 2016 to HK$808.8bn.
    The Northbound scheme has had a harder time gaining traction. Total turnover has been Rmb4.06tr, with net inflows to A-shares of Rmb326.3bn. Hong Kong and international investors have accumulated Rmb181.4bn in Shenzhen-listed A-shares and Rmb310.3bn in Shanghai.
    “With the upcoming inclusion of A shares into major international indices enabled by Stock Connect, I have no doubt Hong Kong will continue to play a vital role in connecting China with the world,” Charles Li, chief executive at HKEX, said in a statement.
  • Southbound investors using the Shanghai Stock Connect channel were also granted a new capital gains tax waiver for investments done through the scheme. The waiver renews an existing arrangement and also harmonises the deadline for the waiver across the Shenzhen and Shanghai arms of the link until December 4, 2019. HSBC noted in a November 13 memo to clients that the CGT exemption for qualified foreign institutional investors, RMB QFIIs, and northbound Stock Connect investors has no time limit. 
  • Neuberger Berman joined the growing crowd of foreign asset managers receiving a private fund management licence from the Asset Management Association of China (AMAC) on November 16, following its establishment of a wholly-owned foreign enterprise. The firm said it already manages portfolios for Chinese institutional and intermediary customers across in equity, fixed income and private equity strategies. NB added two senior members to the China team this year, Bin Yu, equity portfolio manager, and Peter Ru, a fixed income-focused senior portfolio manager.
  • By Paolo Danese
  • 17 Nov 2017

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 Bank of China (BOC) 28.62
2 CITIC Securities 21.06
3 China CITIC Bank Corp 9.72
4 China Merchants Bank Co 9.18
5 Industrial and Commercial Bank of China (ICBC) 7.56

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 22-Nov-17 Province of British Columbia Canada 1,000
2 15-Nov-17 Daimler Germany 4,000
3 13-Oct-17 Global Logistic Properties Singapore 1,000
4 19-Sep-17 Skyworth Digital Holdings China 2,000
5 14-Sep-17 Bank of China (Hong Kong) (BOCHK) China 9,000

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 31.63
2 BNP Paribas 16.57
3 HSBC 14.01
4 JP Morgan 13.39
5 Credit Agricole 11.30

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 15-Nov-17 Bank of China Paris Branch (BOC Paris) China 1,000
2 02-Nov-17 Hitachi Capital (UK) United Kingdom 500
3 27-Oct-17 Korea Development Bank (KDB) South Korea 1,400
4 19-Oct-17 Commonwealth Bank of Australia (CBA) Australia 1,500
5 11-Oct-17 BMW Finance NV The Netherlands 1,000