China market round-up: foreign reserves drop, October exports climb, Singapore Exchange plans to help Chinese enterprises

In this round-up, China’s foreign reserves in October decrease $34bn due to the stronger dollar, monthly exports climbed more than expected, Singapore Exchange signed cooperation agreements to develop more opportunities for Chinese enterprises in Singapore.

  • By Rebecca Feng
  • 09 Nov 2018
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Foreign reserves dropped in October from $3.087tr to $3.053tr, as shown by a November 7 announcement by the State Administration of Foreign Exchange (SAFE).

Analysts have noted that although the monthly drop has been the largest since December 2016, it is still small compared with the monthly drops in 2015.

“This implies that there is no capital outflow panic in China even as USD/CNY approached 7, and depreciated 1.56% in the month,” Iris Pang, economist for Greater China at ING, wrote in  November 7 note.

A spokesperson at SAFE attributed the drop to the stronger dollar in a press conference on November 8.

“Admittedly, the falling FX reserves suggest increasing capital outflow pressure from China amid bearish RMB sentiment,” Ken Cheung, senior Asian FX strategist at Mizuho, wrote in a November 8 note. “Such capital outflow could accelerate should the RMB break above the 7 psychological level in the near term.”

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China’s trade activity picked up in October. Exports and imports jumped 15.6% and 21.4% year-on-year, respectively, stronger than analysts’ consensus estimates of 11.7% and 14.5% respectively, according to Nomura’s analyst Ting Lu. Trade surplus also expanded to $34.1bn from September’s $31.28bn

“Despite the impact of front-loading exports orders due to the tariff implementation, the rather solid China trade figure indicated a resilient external sector, which could help support China growth in the rest of this year,” Mizuho’s Cheung wrote.

Ting Lu, a China economist at Nomura, believed that front-loading activity in October will extend into the last two months of 2018 as exporters anticipate higher tariff rates to be imposed by the US in 2019.

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Singapore Exchange (SGX) signed memoranda of understanding (MoUs) with the Zhejiang Entrepreneurs Association (ZJEA) and the China Futures Association (CFA), aiming to foster and develop greater opportunities for Chinese enterprises in Singapore’s capital market and develop the derivatives markets in both countries, according to a press release on November 5.

About 20% of listed companies and 15% of bond issuers on SGX are already from Greater China.

Asia’s capital markets are becoming more important in supporting the region’s growth, according to a keynote address by Ng Yao Loong, assistant managing director of Monetary Authority of Singapore at the SGX Beijing Forum on the same day.

As Asian enterprises keep growing and expanding their cross-border presence, the need to raise capital also surged. Asia ex Japan companies issued a record high of around $400bn dollar bond issuance last year, Ng said.

However, Ng noted banking financing, especially loans, remains the dominant funding source for enterprises and infrastructure projects in Asia.

“By some estimates, loans represent over 80% of total debt funding in most Asian economies,” Ng said. “This is in stark contrast to markets like the US where capital markets are major sources of financing for enterprises and infrastructure projects.”

Asian capital markets have the potential to play a larger role in better addressing enterprises’ funding needs, Ng said.

Ng also promised to keep expanding SGX’s presence in China, support BRI financing, and formalise cross-border supervisory cooperation.

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Investec Asset Management has appointed Marco Tang as the new head of advisor business for Greater China, according to a November 5 press release. With nearly 20 years of experience in the financial services industry, Tang will be based in Hong Kong and oversee Investec’s advisory businesses in China.

Just a month ago on October 10, Investec hired its new country head for Greater China, Eric Fu, whom Tang will report to.

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Deutsche Bank added the Solactive China Consumer Index to its existing index universe to target investors who wished to participate in the growth of retail sales in China, according to a statement by Solactive on November 6.

Solactive, a German provider of financial indices based in Frankfurt, released its new Solactive China Consumer Index on October 31.

The index tracks the price movements of the 20 largest Chinese companies by market capitalisation. Eligible companies also have to derive more than 75% of their revenues from China.

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United Overseas Bank (UOB) opened a new headquarters building in Shanghai on November 6, according to a company statement. The new UOB Plaza is located in Lujiazui Financial District, China’s largest financial hub.  

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Hong Kong Exchanges and Clearing (HKEX) published its third quarterly result on November 7. HKEX said that Stock Connect Northbound average daily trading (ADT) reached Rmb19.6bn ($2.8bn) as of the end of Q3 2018, representing an increase of 148% from the first three quarters of 2017.

Market participation in Bond Connect has also been growing steadily, with ADT reaching Rmb4.1bn in Q3 2018, a 52% increase compared with Q1 2018. The number of approved overseas institutional investors participating in Bond Connect also increased to 445 at the end of September from 247 as the end of last year.

In August, Bond Connect launched a block trade allocation service, which allows asset managers to allocate trades to multiple client accounts prior to trading. The development intends to accelerate the participation in Bond Connect by global asset managers and investors, according to the report.

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Ping An Insurance has overtaken BlackRock to become HSBC’s biggest shareholder, taking up more than 7% of the bank’s share, according to multiple foreign media reports on November 6.

This investment marked a reversal in the duo’s relationship, as back in 2012 HSBC owned a sizable stake in Ping An.

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Average daily volume (ADV) of trading in Chinese interbank bond market (CIBM) instruments – both government and corporate bonds – transacted via Bond Connect reached $7.9bn in October, according to a Tradeweb monthly activity report for October published on November 7.

The ADV represents a 16.2% dip from September, but an 8.9% increase year-over-year (YoY).

As a comparison, ADV in US government bonds amounted to $79.3bn in October, a 10.6% increase from September and 40.9% increase YoY.

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Lyxor, a UK-based fund manager, launched a new China ETF – the Lyxor MSCI China UCITS ETF – on the London Stock Exchange, according to the official fund factsheet dated October 31. The fund will track the MSCI China Index and trade in US dollars.

The fund has a total expense ratio of 0.30%, compared with the HSBC MSCI China UCITS ETF, whose expense ratio stands at 0.60%, according to the factsheet.

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Standard Chartered released its monthly Renminbi Globalisation Index (RGI), the bank’s proprietary measure of international renminbi usage, on November 8. For the month of September, the index rose for a fifth straight time to 1,981 from 1,916 in August.

“This is the highest level in 22 months, boosted by higher cross-border payments, daily CNY offshore FX turnover, and foreign holdings of onshore assets,” Kelvin Lau, senior economist for Greater China at Standard Chartered, wrote in the report.

The report further pointed out that cross-border payment volumes have been the biggest contributor to the RGI. Northbound investment flows into onshore assets also helped boost the index but not as much as corporates using onshore renminbi for trade settlements.

With the share of renminbi trade settlement in September plummeting to 11% - the lowest in a year - from 12.6% in July to August, the bank predicted that a further rise of RGI can be difficult.


  • By Rebecca Feng
  • 09 Nov 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 18-Dec-18 Bank of China Group Investment China 2,000
2 17-Dec-18 Hungary Hungary 2,000
3 06-Dec-18 China Gas Holdings China 1,300
4 27-Nov-18 Daimler Germany 4,000
5 26-Nov-18 Beijing Enterprises Clean Energy China 2,800

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 30.97
2 HSBC 18.82
3 Societe Generale 3.85
4 Bank of China (BOC) 3.68
5 Bank of Taiwan 3.30

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 03-Dec-18 Huzhou Communications Investment Group China 500
2 22-Nov-18 Bank of China Tokyo Branch (BOC Tokyo) China 800
3 15-Nov-18 RusHydro Russian Federation 1,500
4 13-Nov-18 Bank of China (Hong Kong) (BOCHK) China 1,000
5 19-Sep-18 Agricultural Development Bank of China (ADBC) China 1,200