China market round-up: Hedge fund waits for China reset, Bond Connect volumes are down, SGX launches China bond indices

Well-known hedge fund manager says China reset coming, Bond Connect volumes down 15% in October and Singapore Exchange launches a set of China onshore bond indices.

  • By Paolo Danese
  • 16 Nov 2018
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Kyle Bass, head of hedge fund firm Hayman Capital Management and a well-known China bear, told a forum this week that China's excessive leverage would trigger a market reset.

"It’s insane how levered this market has become,” Bass was quoted stating in a media report. “You’re starting to see bankruptcies across the board in China that are hard to hide if you look at the corporate default rate, the bankruptcy rate, M1 and M2 (money supply), the slowest money growth in over four decades. We’ll have a reset in China, and I think it will happen in the next couple of years."

Bass said that he thought US tariffs on Chinese goods would be bad in the short run but were a healthy development for the longer term, as they would force the Chinese to negotiate.

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A client poll conducted by Citi of some of its trade clients in the region shows that more than half are already adjusting their supply chain in response to trade tensions, the bank said in a November 15 statement. "While many clients are still evaluating the impact on their business most are not waiting. The majority are implementing changes to ensure a limited disruption to their supply chains and business," the bank said.

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There was an average daily turnover of Rmb3.05bn ($438.8m) on Bond Connect in October, according to data by the scheme's operating company.  That was 15.2% lower than the average for the first ten months of 2018. Total trading volume was Rmb54.87bn across 522 trading tickets, with 450 registered investors as of month-end.

In a reversal, overall holdings of onshore bonds declined in October for the first time since the launch of Bond Connect in July 2017 to Rmb1.679tr, down Rmb9.6bn in the month.

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SGX signed an agreement with China Foreign Exchange Trade System (CFETS) and Bank of China (BOC) to launch the CFETS-BOC Traded Bond Indices on SGX.

"[The indices] track the movements of the Chinese bond market and can be used by investors to benchmark their Chinese bond portfolio performance," the Monetary Authority of Singapore noted in a statement on November 14. "SGX will be the first exchange to distribute the CFETS-BOC Traded Bond Indices outside of China."


  • By Paolo Danese
  • 16 Nov 2018

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 Bank of China (BOC) 21.17
2 China Merchants Securities Co 17.84
3 Industrial and Commercial Bank of China (ICBC) 14.86
4 Agricultural Bank of China (ABC) 10.81
5 China Securities 9.01

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 17-May-19 Trafigura The Netherlands 540
2 16-May-19 CITIC Pacific China 1,000
3 15-May-19 Republic of the Philippines Philippines 2,500
4 29-Apr-19 Semiconductor Manufacturing International Corp (SMIC) China 1,000
5 29-Apr-19 Semiconductor Manufacturing International Corp (SMIC) China 500

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 25.05
2 Credit Agricole 7.04
2 HSBC 7.04
4 Bank of China (Hong Kong) (BOCHK) 6.90
4 Bank of Communications Hong Kong Branch (BOCOM HK) 6.90

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 22-May-19 Agricultural Development Bank of China (ADBC) China 3,000
2 16-Apr-19 ICBC Singapore Branch China 1,000
3 10-Apr-19 Bank of China Macau Branch (BOC Macau) China 4,500
4 15-Mar-19 Bank of Communications Hong Kong Branch (BOCOM HK) China 2,500
5 13-Mar-19 Daimler International Finance Germany 1,000