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China market round-up: China decreases treasury holdings, Moody’s downgrades Hong Kong outlook, BOC sets up new RMB clearing bank

Beijing_230
By Rebecca Feng
20 Sep 2019

In this round-up, the gap between Japan's and China’s holdings of US Treasuries widened, Moody’s downgraded Hong Kong's outlook and Bank of China Manila branch gained renminbi clearing bank status.

Since June, Japan has taken over from China as the biggest foreign owner of US Treasuries.

That remained the case in July with a widened gap between Japan’s and China’s holdings of US Treasuries. While Japan's holdings rose by $7.9bn to a more than two-year high of $1.13tr, China’s stake fell by $2.2bn to $1.11tr.    

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Moody’s downgraded Hong Kong’s outlook to negative from neutral on Monday due to the ongoing protests. It followed in the footstep of Fitch, which downgraded the SAR’s long-term foreign-currency issuer default rating from AA+ to AA last week.

“Moody's has previously noted that a downgrade could be triggered by a shift in the current equilibrium between the SAR's economic proximity to and legal and regulatory distance from China,” the report read. “The decision to change Hong Kong's outlook to negative signals rising concern that this shift is happening.”

In separate news, a group of Hong Kong activists visited Washington DC on Tuesday. The group testified before the US congress and tried to persuade it to support the city’s pro-democracy movement.

“Decades from now, when historians look back, I’m sure that 2019, much more so than 2014, will turn out to have been a watershed,” Joshua Wong, secretary-general of pro-democracy party Demosistō, said in his testimony. “I hope, too, that historians will celebrate the United States Congress for having stood on the side of Hongkongers, the side of human rights and democracy.”

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Bank of China Manila branch became the newest renminbi clearing bank licenced by the People’s Bank of China, according to an announcement from the bank on Tuesday. Bank of China has renminbi clearing banks in 13 countries.

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United Overseas Bank (China), a wholly-owned subsidiary of Singapore’s United Overseas Bank, opened a branch in Zhongshan city, Guangdong province, on Friday, according to a press release. This is the first branch in Zhongshan city opened by a foreign bank and the Singaporean firm's seventh branch in the Greater Bay Area.

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China International Capital Corp signed a memorandum of understanding with the Luxembourg Stock Exchange on Monday.

Both parties agreed to explore areas of cross-market product offerings, financial innovation and green finance.

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In the first eight months of 2019, Chinese companies invested a total of Rmb493.1bn ($69.6bn) to 4,659 offshore corporations based in 159 countries and regions, according to a Tuesday statement from the Ministry of Commerce. That marks a 2.7% year-on-year increase.

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In August, the renminbi took back its position as the fifth most active currency for international payments by value, with a share of 2.22%, according to Swift’s monthly RMB tracker. Renminbi payments value increased by 15.27% compared with July, when it lost the position to the Canadian dollar.

In terms of international payments, excluding payments within the Eurozone, the renminbi moved up one position to the seventh with a share of 1.42% in August.

By Rebecca Feng
20 Sep 2019