China market round-up: US Treasuries holdings drop, local government bond issuance jumps, regulators encourage SOEs to list on Star

In this round-up, China lowered its holdings of US Treasuries yet again in May, new issuance of local government bonds has skyrocketed and regulators are wooing state-owned enterprises (SOEs) to list on the new Shanghai Star market.

  • By Rebecca Feng
  • 19 Jul 2019
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China cut another $2.8bn of US Treasuries holdings in May, the third month in a row, according to data released by the Department of the Treasury on Tuesday. China now holds $1.11tr of US Treasuries, just ahead of Japan with $1.10tr.

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New bond issuance in China reached Rmb4tr ($582m) in June, according to a monthly report from the People’s Bank of China. Issuance from central and local governments hit Rmb384.2bn and Rmb899.6bn, respectively, with the latter rising an impressive three-fold compared to May.

Credit bonds issued by corporations reached Rmb594bn, while Rmb134bn of asset-backed securities were sold, nearly double the May issuance size.

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In the first half of 2019, total profits generated by centrally-owned state-owned enterprises (SOEs) rose 8.6% to Rmb704bn, the State-owned Assets Supervision and Administration Commission (Sasac) said at a Tuesday news conference.

During the conference, Peng Huagang, spokesperson at Sasac, encouraged SOEs, especially those owned by the central government, to list on the new Star Market to further boost the vitality of the board. The Star Market, launched in June, focuses on technology and innovative companies.

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By June this year, Chinese domestic investors invested a total of Rmb346.8bn into 151 countries and 3,582 offshore corporations, a 0.1% year-on-year increase, according to a release by the Ministry of Commerce on Tuesday. New contracts reached Rmb718.2bn, a 5.6% year-on-year rise.

In June alone, outbound direct investment from Mainland China reached Rmb63.7bn, a 6.3% year-on-year climb. Among these, investments to Belt and Road countries were worth $6.8bn.

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Industrial profits growth in June jumped 6.3% year-on-year versus a 5% year-on-year growth in May, according to data from the National Bureau of Statistics. The rise was mainly driven by growth in the mining and manufacturing sectors.

Headline retail sales also grew 9.8% year-on-year in June. Cumulative fixed-asset investment in the first six months was up 5.8% year-on-year.

“The rebound in June growth was mainly driven by renewed policy support,” Yu Song, chief China economist at Beijing Gao Hua Securities, wrote in a Monday note. “Policymakers lowered interbank rates, issued large amounts of government bonds, and likely put more administrative pressures on state entities to take actions in our view […]”

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Banks bought Rmb979.5bn of foreign currencies in June and sold Rmb1.11tr of foreign currencies on the Chinese foreign exchange market, creating a deficit of Rmb132.8bn, according to data published by the State Administration of Foreign Exchange (Safe) on Thursday.

Banks bought Rmb895.9bn of foreign currencies from clients and sold Rmb1.03tr to clients. Banks themselves bought Rmb83.6bn of foreign currencies and sold Rmb85bn. Compared with last month’s figures, banks bought less and sold more for themselves and bought more and sold less for clients.

  • By Rebecca Feng
  • 19 Jul 2019

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 Bank of China (BOC) 19.93
2 Industrial and Commercial Bank of China (ICBC) 13.40
3 China Merchants Securities Co 12.94
4 Agricultural Bank of China (ABC) 7.84
5 China Securities 6.54

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 07-Aug-19 Daimler Germany 5,000
2 31-Jul-19 Cassa Depositi e Prestiti SpA Italy 1,000
3 24-Jul-19 Semiconductor Manufacturing International Corp (SMIC) China 2,000
4 10-Jul-19 BMW Finance N.V. Germany 3,500
5 20-Jun-19 Maybank Malaysia 2,000

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 32.50
2 Credit Agricole 6.34
2 HSBC 6.34
4 Bank of China (Hong Kong) (BOCHK) 6.22
4 Bank of Communications Hong Kong Branch (BOCOM HK) 6.22

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 16-Jul-19 CIFI Holdings China 1,600
2 22-May-19 Agricultural Development Bank of China (ADBC) China 3,000
3 16-Apr-19 ICBC Singapore Branch China 1,000
4 10-Apr-19 Bank of China Macau Branch (BOC Macau) China 4,500
5 15-Mar-19 Bank of Communications Hong Kong Branch (BOCOM HK) China 2,500