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The week in review: Xi signs BRI deals during Myanmar visit, PBoC keeps LPR rates unchanged, overseas holdings of bonds, stocks in China grow

Computer trading fotolia
By Addison Gong, Rebecca Feng
20 Jan 2020

In this round-up, China and Myanmar have signed deals on Belt and Road projects, the central bank has kept the benchmark lending rates unchanged, and overseas investors increased their holdings of Chinese bonds and stocks by $128bn in 2019.

China and Myanmar have agreed to strengthen their collaborations on the Belt and Road Initiative, according to a joint statement published on the website of the Ministry of Foreign Affairs on Saturday.

China’s president Xi Jinping, who was visiting the southeast Asian country last Friday and Saturday, has reportedly signed 33 agreements with Aung San Suu Kyi, the state counsellor of Myanmar, regarding key Belt and Road projects including the China Myanmar Economic Corridor.

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In December, China’s industrial production jumped by 6.9% year-on-year, an acceleration from November’s 6.2% growth. Fixed asset investment also shot up by 7.4% year-on-year in December compared with 5.2% in November. Retail sales grew by 8.0%, unchanged from November, according to data released by the National Bureau of Statistics on Friday.

However, some more detailed data points revealed “deep-rooted weakness,” Ting Lu, chief China economist at Nomura, noted in a Friday report.

For instance, new home sales dropped by 1.7%, reversing the 1.1% growth in November. Property investment grew by 7.4% in December, down from November’s 8.4% growth.

“[We] believe China could experience a short period of growth stability in Q1, perhaps even into Q2, but headwinds from the property sector, worsening fiscal conditions and limited policy space could then lead to a further growth slowdown,” Lu added.

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The People’s Bank of China (PBoC) injected Rmb250bn ($36.5bn) of 14-day reverse repo into the interbank market with an interest rate of 2.65% on Monday morning.

This is the fifth consecutive day for the central bank to inject liquidity into the interbank market through 14-day reverse repos. Last week, the central bank extended a total of Rmb600bn of 14-day reverse repos. On Sunday, it injected another Rmb200bn.

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The PBoC meanwhile has kept the benchmark one-year loan prime rate (LPR) for the month starting January 20 unchanged from the previous month at 4.15% on Monday. The five-year LPR also remained the same at 4.8%.

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The central bank also published 2019 data on the Chinese financial markets over the weekend. The full year central government bond issuance summed up to Rmb4tr, while that from local governments was slightly higher at Rmb4.4tr. Financial bond volume reached Rmb6.9tr, while bonds from government supported institutions — such as Central Huijin Investment — were worth Rmb372bn.

In addition, asset-backed securities volume topped Rmb2tr, negotiable certificates of deposit (NCDs) Rmb18tr, and corporate bonds Rmb9.7tr.

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In December, banks bought and sold Rmb2.71tr for their clients, according to data published by the State Administration of Foreign Exchange (Safe) on Friday. Trading volumes in the interbank market between banks themselves reached Rmb14.38tr.

The FX spot market managed a total volume of Rmb6.78tr and the derivatives market posted a trading volume of Rmb10.32tr.

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Safe data also showed that overseas investors increased their holdings of onshore Chinese bonds by $86.6bn in 2019. Their holdings of listed companies’ stocks increased by $41.3bn.

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Ant Financial, a financial affiliate of the internet giant Alibaba, is preparing for IPOs in both mainland and Hong Kong, Reuters reported, citing sources.

However, Reuters added that a spokesman at the company said it does not have a plan or timetable for the listing.

Ant Financial runs Alipay, one of the two dominant mobile payment systems in Mainland China. The other is WeChat Pay, run by Tencent.

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The province of Jiangsu has printed the first government bond in 2020 worth Rmb35.7bn, with Fubon Bank (China) as the only Taiwanese firm in the syndicate team. According to a Friday press release on the Shanghai Stock Exchange website, Fubon was the first Taiwanese bank to have worked as an underwriter that also received final allocations on a Chinese local government bond issuance this year.

The SSE said it will work to open up the local government bond market to offshore institutional investors, including Taiwanese banks, foreign banks, foreign insurance firms and investors under the dollar-denominated Qualified Foreign Institutional Investor (QFII) and renminbi-denominated RQFII programmes, in 2020.

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Data compiled by the Shanghai Securities News showed that of the 1,165 Chinese listed companies that have published forecasts on their 2019 annual results by Sunday, 745 — or 64% — are expecting better performances year-on-year.

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The China Securities Regulatory Commission emphasised its primary goals for 2020 during an annual planning meeting hosted on Friday.

The securities regulator listed some top priorities including improving the market environment by introducing stricter regulations and preventing risks, improving the quality of listed companies by making it easier for companies to delist and continuing to build a law-based market by first implementing the new Securities Law.

The regulator also said that it would initiate more market reform measures, starting from establishing a registration-based IPO system for boards other than the new Star Market. To do that, the priority will be encouraging more real technology firms to list, bringing medium and long term capital into the market and reforming the ChiNext board and the ‘New Third Board’, an over-the-counter system mainly for small and medium-sized enterprises who cannot yet list on the main board market.

By Addison Gong, Rebecca Feng
20 Jan 2020