The week in renminbi: Politburo discusses leverage levels, ETF Connect in the pipeline, HSBC JV expands A-shares coverage

In this round-up, China’s Politburo meets to discuss the policy priorities for 2018, Shenzhen Stock Exchange in talks over ETF Connect, and HSBC expands its A-shares coverage from its onshore securities joint venture.

  • By Paolo Danese
  • 11 Dec 2017
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  • China’s Politburo held a meeting last week where it signaled the government’s intention to tackle issues of leverage, poverty and pollution, as well as increase focus on the real estate market. Bank of America Merrill Lynch analysts noted in a report on Monday that measures on the latter are likely to include further development of social housing rather than the introduction of a new property tax. 
    The meeting preceded this week’s Central Economic Work Conference, which is likely to further elaborate on the same themes. Analysts noted the shift in emphasis on economic growth that was first raised by president Xi Jinping at the Party Congress in October, going from high growth rate targets to high quality development.
  • Chinese insurer Ping An made headlines with its buildup in shares of HSBC, reaching a 5% stake. The firm used the southbound channel of Stock Connect to expand its stake. Ping An’s stake amounts to 95% of all HSBC shares held by southbound investors, CICC noted in a report on December 11, quoting HKEX data.
    "The IFRS 9 accounting rules — which will be implemented as early as 2018 for China insurers — will result in more of their equity investments to be held at fair value through P&L, and therefore we believe insurers’ likely increased demand for high dividend yield, low volatility blue-chip stocks would continue to drive southbound flows into H-shares, going forward,” wrote Kevin Liu, equity strategist at CICC.
  • Media reports noted the Shenzhen Stock Exchange is in talks for the launch of ETF Connect, which will see exchange-traded funds added to the list of eligible securities tradable with Hong Kong under the mutual market access scheme.
    “We expect the launch of ETF connect to attract more Mainland investors to tap the offshore market,” said Tommy Xie, an economist at OCBC. "This will also help to enhance Hong Kong’s role as the largest offshore renminbi center. Moving forward, we expect more cross-border investment schemes to be launched as China’s authorities are planning for further openness of China’s financial market."
  • Chinese investors continue to add momentum to the Hong Kong stock market. Total southbound flows under Stock Connect totaled Rmb70.2bn ($10.6bn) in November, according to OCBC data. Net inflows to Hong Kong via the Mutual Recognition of Fund scheme were Rmb12.2bn as of September.
  • HSBC announced on December 8 the expansion of its A-shares coverage through its HSBC Qianhai Securities majority-owned joint venture. The bank has built a team of 15 researchers to cover a range of sectors, with the analysts reporting to Steven Sun, head of equity strategy for China. HSBC said it plans to expand the team to around 50 people in the medium term. 

  • By Paolo Danese
  • 11 Dec 2017

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 China Merchants Securities Co 17.33
2 Industrial and Commercial Bank of China (ICBC) 14.45
3 CITIC Securities 10.36
4 Agricultural Bank of China (ABC) 9.42
5 China CITIC Bank Corp 8.48

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 15-Oct-18 China Power International Development China 2,000
2 11-Oct-18 Global Logistic Properties via Iowa China Offshore Holdings Hong Kong 1,200
3 28-Sep-18 Trafigura Singapore 700
4 17-Sep-18 The Wharf (Holdings) Hong Kong 2,000
5 10-Sep-18 China Gas Holdings China 1,500

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 33.31
2 HSBC 20.53
3 Societe Generale 4.21
4 Bank of Taiwan 3.60
4 Cathay United Bank 3.60

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 19-Sep-18 Agricultural Development Bank of China (ADBC) China 1,200
2 17-Sep-18 Hitachi Capital (UK) United Kingdom 600
3 13-Sep-18 CIFI Holdings China 1,000
4 05-Sep-18 Daimler Germany 1,000
5 03-Sep-18 First Abu Dhabi Bank PJSC United Arab Emirates 650