The week in renminbi: Market rebounds after Xi and Trump’s call, Xi promises further reforms at Shanghai import expo, Dubai International Financial Centre signs MoU with China Banking Association

FX and equity markets jump as a possible US-China trade deal is back in sight, Chinese president Xi Jinping promises more developments on free-trade zones and a registration-based stock system, and the Dubai International Financial Centre takes action to expand Chinese institutions’ access to the Middle East Africa and South Asia (MEASA).

  • By Rebecca Feng
  • 05 Nov 2018
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Following a reported phone call between Xi and US president Donald Trump last Thursday night, net inflows to China’s equity market through Stock Connect reached Rmb17.4bn ($2.52bn), according to a statement by Hong Kong Exchanges and Clearing (HKEX).

Carie Li, an economist at OCBC Wing Hang Bank, said the rebound was a sign of rising confidence in China’s market among investors.

“In the near term, the market will closely eye the Trump-Xi meeting during the G20 summit,” Li wrote in a November 5 note. “Before both sides reach any meaningful agreements, China may proactively unveil supportive measures to alleviate the downside risks from external and internal uncertainties.”

The offshore renminbi was trading at 6.9088 against the dollar at 11am November 5, according to Bloomberg data. Although a slight depreciation from Friday’s close at 6.8691, it is still a 1.02% appreciation from the previous week’s highest level of 6.98.

The Shenzhen Stock Exchange composite index jumped on Friday from 1306.31 at to 1351.09 while the Shanghai Stock Exchange composite index jumped from 2606.24 to 2676.48 on the same day, according to Bloomberg data.

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In the opening speech of the week-long China International Import Expo (CIIE), Xi Jinping promised to facilitate the establishment of Hainan’s free trade zone (FTZ) and the Japan-Korea-China free-trade agreements (FTA), as well as a shift from an approval-based system to a registration-based system on a new technology and innovation board on the Shanghai Stock Exchange (SSE).

Xi also promised to further develop the Yangtze River Delta region and elevate it to the level of national strategy.

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China Securities Regulatory Commission (CSRC) is developing credit protection tools to help private enterprises raise cash, according to a statement on November 2.

The first corporations with credit protection contracts on their name were Hongshi Holding, a cement and environmental investment company, JCHX Mining Management, Suning Electronics, and Zhejiang Hengyi, a chemical fiber manufacturer.

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The People’s Bank of China (PBoC) expressed concerns on rising global protectionism and said it had hurt the Chinese financial market, the central bank wrote in its yearly financial stability report on November 2. The report also said that monetary policy adjustments in the US and other developed economies may trigger global liquidity tightening and have spillover effects on emerging markets.

However, the report emphasised that credit risk, rather than macro risk, is the main source of concern. It warned of “grey rhino” financial risks, meaning risks that are obvious and visible but often ignored, but said these risks are controllable and a financial melt-down is out of the question.

For the financial sector, the central bank highlighted several steps to take in the coming year. First, the central bank will lower its expectation for GDP growth, which is currently too high. The PBoC hopes lower expectations will help reduce debt burdens and curb over-borrowing activities.

Second, the central bank will improve macro-prudential regulations and strengthen supervision to better detect systematic risks. The report suggested establishing a separate sub-council under the current financial stability and development commission that solely takes charge of ensuring financial market stability. The report also recommended strengthening the budget autonomy of PBoC and relevant supervision bureaus.

Third, the central bank will enhance supervision for banking, security, and insurance industries, gradually get rid of implicit guarantee practices, strengthen supervision for the fintech industry, and further develop inclusive finance.

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The SSE said in a November 2 statement that it would restrict verbal guidance to curb market fluctuations, a practice heavily used between mid-2016 and early 2016 when the Chinese stock market experienced significant turbulence. SSE also promised to hold back from suspending trading accounts and do so only in extreme situations.

In the same press release, the SSE also published the rules for the upcoming London-Shanghai Stock Connect scheme. The new rules will allow investors to buy foreign stocks indirectly via depository receipts (DRs).

According to the press release, Chinese firms can now raise funds by issuing Global Depository Receipts in London. However, London-listed companies can still only issue China Depository Receipts backed by existing shares.

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Bridgewater (China) Investment Management (BCIM), a wholly owned subsidiary of Bridgewater Associates, launched its first onshore China fund on October 31, according to a company press release.

The new fund, Bridgewater All Weather China Private Fund No. 1, is structured in a similar way to its offshore counterpart, Bridgewater’s Offshore All Weather China fund, launched in April this year. The new onshore fund holds only domestic Chinese financial assets and targets mainland investors.

“Our goal is to help Chinese investors achieve maximum long-term wealth by prudently managing allocations of risk across assets and strategies over time,” Bob Prince, co-chief investment officer at Bridgewater, said in the press release.

The US-based portfolio manager received its private fund management (PFM) license from Asset Management Association of China (Amac) in June. So far, thirteen foreign asset managers have been granted the PFM license.

According to the license rules published by AMAC, asset managers must launch products within six months of license registration.

Bridgewater Associates, led by Ray Dalio, has $160bn in assets under management globally.

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The Dubai International Financial Centre (DIFC) signed a memorandum of understanding (MoU) with the China Banking Association (CBA), according to a press release on November 4. 

The MoU is aimed at helping DIFC and CBA share practices and deliver better services to over 2,000 active registered firms operating in the DIFC and 695 members in financial services and fintech sectors in the CBA.

“The world-class infrastructure we have built in DIFC is rapidly becoming the ideal gateway for Chinese institutions to access the fast-growing markets of the MEASA region and undertake activities that support Belt and Road initiatives,” Arif Amiri, chief executive officer of the DIFC, said in the press release.



  • By Rebecca Feng
  • 05 Nov 2018

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 China Merchants Securities Co 16.70
2 Industrial and Commercial Bank of China (ICBC) 14.38
3 CITIC Securities 10.44
4 Agricultural Bank of China (ABC) 9.08
5 China CITIC Bank Corp 8.17

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 24-Oct-18 China Gas Holdings China 2,000
2 15-Oct-18 China Power International Development China 2,000
3 11-Oct-18 Global Logistic Properties via Iowa China Offshore Holdings Hong Kong 1,200
4 28-Sep-18 Trafigura Singapore 700
5 17-Sep-18 The Wharf (Holdings) Hong Kong 2,000

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