Northeast Asia

The broad liberalisation of access to the China interbank bond market (CIBM) announced in February has been given the thumbs up, but hedge funds keen to have a more direct route into the Chinese market face a complex landscape, with the country’s regulators still treating the industry with suspicion.

China is mulling the possibilities of issuing an SDR-denominated bond, the People’s Bank of China governor Zhou Xiaochuan said on Thursday.

In the past week, two Chinese officials have publically acknowledged the possibility of a tax on foreign exchange (FX) transaction to curb capital outflows. Although details on the initiative still scant, views are diverging about whether it is a good measure against foreign speculators or will end up back firing.

China’s reported intention to introduce a Tobin tax on foreign exchange transactions has provoked a somewhat typical rush of condemnation. However, some analysts are already pointing out that pros and cons might indeed balance each other out.

Hong Kong-listed China Gas Holdings has broken new ground in China’s Panda bond market, becoming the first corporate issuer to take the deal proceeds offshore, several sources told GlobalCapital Asia's sister publication GlobalRMB this week.

With foreign ownership of Chinese bonds still at very low levels, the decision to open China’s interbank bond market (CIBM) could truly alter global investment strategies. But, at least for now, the devil will be in the details, with analysts saying that foreign ownership is unlikely to surge in the short term.

The renminbi's acceptance into the IMF Special Drawing Rights (SDR) basket and Chinese initiatives such as the Asian Infrastructure Investment Bank, are leading to a new monetary order, according to speakers at the Asia-Global Dialogue 2016 conference, held in Hong Kong on January 28.

There were dramatic moves in the offshore renminbi market on the morning of January 12 as the spread between onshore RMB (CNY) and offshore RMB (CNH) all but disappeared. And, in a radical development, the People’s Bank of China (PBoC) purchases of CNH in Hong Kong drove the overnight CNH Hong Kong interbank offered rate (CNH Hibor) to a record 66.8%.

China’s attempts to allow markets forces to play a bigger role in the currency seemed to have backfired this week with both the onshore RMB (CNY) and its offshore (CNH) counterpart experiencing a tumultuous ride. Further depreciation is expected but the big unknown remains how policy makers will act.

China’s onshore FX market has kicked off its new trading hours this week which allow for trading until 11.30pm. By while the regulator’s move is well intentioned, FX traders who are working the new night shift say the market faces some fundamental problems.

The China Foreign Exchange Trade System (CFETS) published details of an exchange rate index for the renminbi for the first time on December 11. The index is based on a basket of 13 currencies, including the dollar, euro and yen.

The announcement of a new RMB exchange index has rekindled debate about whether the People's Bank of China (PBoC) needs to review the way it communicates with global markets. The answer is a resounding yes.