FX:
PBoC's renminbi fix against the dollar was set at 6.8673 this morning, 113bp stronger than Friday's. In the spot market, the CNY was trading at 6.8898 as of 10.52am, with the CNH at 6.8787, down 0.07% and 0.06% from their previous close, respectively, according to Bloomberg data.
The dollar index was trading at 97.316 as of 10.30am, up 0.18% from the last close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 93.19 on Sunday, down 0.1% from its previous close.
The trade-weighted index by CFETS closed at 92.49 on May 19, down 0.6% from the previous week, with the BIS basket and special drawing rights basket at 93.46 and 93.58, down 0.6% and 0.8%, respectively.
The Ürümqi branch of Pakistan’s Habib Bank has joined the interbank FX market, effective from May 22, according to an announcement by CFETS.
Regulators:
Pan Gongsheng, head of State Administration of Foreign Exchange (Safe), chaired a seminar on foreign investment on May 19 in China with representatives of foreign companies including Caterpillar, Dell and Ericson. Pan noted that the recent stability in cross-border capital flows is beneficial to foreign companies investing in China, and that maintaining this stability requires the efforts of both the regulators and markets.
The Cross-border Interbank Payment System (CIPS) announced that 15 financial institutions have been approved as renminbi cross-border payment system’s indirect participants, effective May 19.
Swap:
PBoC renewed its bilateral currency swap agreement with the Reserve Bank of New Zealand on May 15. Effective for three years, the agreement will maintain the size of the swap line at Rmb25bn ($3.63bn) and can be extended upon consent by both parties.
Investment:
All bonds registered and deposited in SHCH are eligible for investment under Bond Connect, according to a joint announcement by the Hong Kong Monetary Authority and SHCH on 19 May. The statement also confirmed that SHCH and HKMA’s Central Moneymarkets Unit (CMU) will jointly provide the custody and settlement service for the Bond Connect, and that SHCH and CMU will sign a legal agreement to confirm their respective roles as the ultimate central securities depository and nominee holder of the bonds.
The State Administration of Foreign Exchange (Safe) published data regarding investments under the Mutual Recognition of Funds scheme as of April 30. Gross purchases of Hong Kong funds reached Rmb11.46bn, with net purchases of Rmb7.36bn, or 1% higher than the end of March. Meanwhile, gross sales of Mainland funds in Hong Kong inched up to just Rmb192.77m, with net sales of Rmb110.94m, up 8.6% in the month.
China may resume its qualified domestic limited partnership (QDLP) programme as early as June, but the amount of quota available may be lowered from $100m per manager to $50m-$75m, according to media reports quoting market sources. QDLP, which was informally suspended in 2015, allowed domestic investors to take their money overseas.
Belt and Road:
Shanghai Free Trade Zone (FTZ) will provide direct funding for Belt and Road projects to companies, said Zhang Danian, chief Shanghai representative at law firm Baker McKenzie. Zhang said Shanghai needs to explore new channels, such as Panda bonds, to provide financing for Belt and Road initiatives abroad, and named Rusal’s debut Panda bond in March as an example of this.
China recorded $3.98bn of non-financial outbound direct investment to Belt and Road projects in Q1 2017, according to the Ministry of Commerce. The investments went to 45 countries along the Belt and Road, including Indonesia, Laos and Singapore, and made up 15.1% of China’s total outbound investment in that period.
Shanghai Stock Exchange (SSE) signed a memorandum with Bursa Malaysia to enhance co-operation on Belt and Road on May 15, according to an announcement by SSE. The statement said the two exchanges will explore ways to co-operate in market data, product and market promotion, in order to use both countries’ capital markets to serve the needs of Belt and Road.
HKMA’s Infrastructure Financing Facilitation Office (IFFO) has published a reference term sheet on the risks associated with Belt and Road projects. The term sheet details risks ranging from exchange rate fluctuations and business risk, to construction and regulatory risks.
Hubs:
The four China ETFs listed on Singapore Exchange recorded a total return of 0.5% and 4.4% month-to-date and year-to-date, respectively, which brings their 12-month total return to 19.2%, according to the exchange. SGX also noted that China has recorded the highest level of equity inflows in the Asia Pacific region so far this year, with a net inflow of $18.9bn.
RMB deposits in Taiwan held stable in April, falling 0.35% to Rmb307.77bn. Domestic banking units saw a slight 0.6% drop to Rmb275.16bn, while offshore banking units saw deposits grow 2% to Rmb32.61bn. In South Korea, instead, RMB deposits took a hit, down 10.21% to Rmb8.41bn. The deposit pool has been less than Rmb9bn on average in the year so far, down from the Rmb25bn of the first four months of 2016.
Derivatives:
Dubai Gold and Commodities Exchange (DGCX) is expecting more Chinese investors to participate on the exchange following its launch of the first renminbi-denominated gold futures outside China, according to a media report. The futures contract has traded more than 3.5 tonnes since its launch on March 10, said the report.
Our most recent stories:
Bond Connect is set to launch in July, but China interbank bond market direct investors may be barred from the party, market sources told GlobalRMB.
Our Bond Connect lowdown: everything you need to know about the new scheme.
China Citic Bank is issuing its maiden Panda bond, which will be the first by a financial institution since November 2016, according to GlobalRMB data.
Analysts remain divided over what the Belt and Road will mean for China and its renminbi internationalisation strategy after the Belt and Road forum in Beijing.
In case you missed it, GlobalRMB moderated a webinar on China's bond market on May 15 with speakers from Euroclear Bank, Hong Kong Exchange (HKEX) and Standard Chartered.
The Shanghai International Energy Exchange (INE), a subsidiary of the Shanghai Futures Exchange, has moved another step closer towards introducing crude oil futures.