China people & markets round-up: RMB is public sector investors’ favourite, S&P set for onshore JV, Fidelity sounds Chinese default alarm

Public institutions want to up their stake in RMB assets, S&P says it wants a subsidiary in Mainland China, and Fidelity warns investors of rising default risk among corporate issuers in the onshore bond market.

  • By Noah Sin
  • 25 May 2018
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Public sector investors want to hold more assets in RMB in the next 12 to 24 months, favouring the currency over any other, according to a survey by the think tank Official Monetary and Financial Institutions Forum (OMFIF).

“The growing role of the renminbi as a trade and investment currency raises the importance of holding it as a reserve asset to ease any short-term balance of payments pressures that may arise with China and to ensure liquidity,” said OMFIF.

The survey looked at the attitudes of investors including central banks, sovereign wealth funds and pension funds. But although the aggregate numbers paint an encouraging picture, public pensions do not appear particularly impressed by the Chinese market.

“Public pension funds remain wary of boosting their renminbi exposure, with none planning to increase it over the next two months,” said OMFIF. “This reflects concerns over China’s large debt build-up and periodic stock market volatility.”

OMFIF surveyed 65 public sector investors, which manage $11.6tn of assets or 32% of total assets under management globally between them.


Fitch and Standard & Poor’s are applying for licences to rate onshore Chinese bonds, the credit rating agencies told media on Friday.

“The company will be established as a greenfield operation and built organically... We believe this option allows us to build the model that best suits our business and clients alike, while aligning well with the policy goals of local regulators,” said Simon Jin, president for Greater China at S&P.

Fitch, which sold its minority stake in China Lianhe Credit Rating in January, is also in the application pipeline, said a spokesperson.

The door to rating Chinese bonds was opened to the big three agencies after the National Association of Financial Market Institutional Investors published its guidelines for foreign agencies to enter the onshore market.


China’s efforts to tighten liquidity is forcing some corporates to default on their bonds, Freddy Wong, portfolio manager at Fidelity International, said in a May 21 memo.

“The main reason behind the most recent round of defaults is that it is difficult for these companies to issue new debt on the open market to repay their existing loans, as banks have withdrawn their standby credit facilities and smaller banks in particular refuse to lend,” he said.

But given that China is starting from a low base when it comes to default rates, Wong reckoned there is no reason for international investors to panic.

“China’s onshore default rate, which is now around 0.1%-0.2%, is still low compared to many markets, for example, the Asian high yield dollar [bond] default rate is around 3%-4%,” he said. “The total number of onshore bonds defaulted amounted to Rmb91bn ($14.2bn), which accounts for just 0.12% of the outstanding bond balance in China.”


AXA and Industrial and Commercial Bank of China (ICBC) have won the regulatory approval to establish a joint venture asset manager, according to a May 18 statement by the Chinese bank. The company will manage RMB and foreign currency funds.

  • By Noah Sin
  • 25 May 2018

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 China Merchants Securities Co 14.44
2 Industrial and Commercial Bank of China (ICBC) 11.65
3 Bank of China (BOC) 10.33
4 CITIC Securities 8.41
5 Agricultural Bank of China (ABC) 7.17

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 17-Jan-19 Everbright Water China 700
2 10-Jan-19 Beijing Enterprises Water Group China 2,000
3 18-Dec-18 Bank of China Group Investment China 2,000
4 17-Dec-18 Hungary Hungary 2,000
5 06-Dec-18 China Gas Holdings China 1,300

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 47.62
2 ANZ 19.05
2 Deutsche Bank 19.05
4 China Development Financial Holding Corp 14.29

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 31-Jan-19 Emirates NBD United Arab Emirates 400
2 23-Jan-19 Goldman Sachs United States 150
3 22-Jan-19 QNB Finance Qatar 500
4 03-Dec-18 Huzhou Communications Investment Group China 500
5 22-Nov-18 Bank of China Tokyo Branch (BOC Tokyo) China 800