This daily digest focuses on Yuan rates, major Chinese economic data, market sentiment, new developments in China’s foreign exchange policies, changes in financial market regulations, as well as market news typically available only in Chinese-language sources.
- China’s investment conditions improved in September, with a 2.5% growth in private investment.
- Both sales and investment in real estate picked up in September, increasing the risk of price bubbles.
- The PBOC Shanghai Branch demanded local commercial banks to tighten mortgage issuance.
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Yuan Rates
- The PBOC weakened the Yuan by -23 pips against the U.S. Dollar to 6.7362 on Thursday. Following the release of the Yuan fix, the offshore Yuan strengthened against the Dollar and rose to the strongest level in three days, with the USD/CNH dipping 6.7375. This is likely because the offshore Yuan was trading below the guided level despite the drop in the fix. Forty five minutes later, China’s 3Q GDP print came in, showing a steady growth of 6.7%, in line with estimates. In an immediate response to the GDP read, the offshore Yuan fell against the Dollar. By the time this report was written, the Yuan recovered with the USD/CNH retracing around 6.7410.
USD/CNH 15-Minutes
Prepared by Renee Mu.
Key Economic Indicators
China’s investment conditions showed improvement in September, after two main measures hit all-time lows in August. The growth in fixed assets investment excluding rural (total investment) increased to 8.2% in September from 8.1% in the month prior; the growth in private investment in fixed assets (private investment) rose to 2.5% from 2.1% over the same span of time.
The investment prints are consistent with the money supply reads released yesterday. The gap between the growth in M1 and M2 has narrowed to 13.2% in September, indicating companies and individuals are spending more.
However, it may be too soon to say that Chinese companies’ investment has recovered, as the growth rates remained at relative low levels. Regulators are more likely to wait a bit longer in hopes of seeing more improvement in investment before make major changes in either monetary policy or fiscal policy.
Data downloaded from Bloomberg; chart prepared by Renee Mu.
Chinese housing markets have been in the spotlight over the past two months, amid soaring prices. According to a report released by China’s Statistics Bureau yesterday, both sales and investment in real estate saw increases once again in September: The sales of commercial buildings expanded +41.3% on an annualized basis and the investment in real estate rose +5.8%, despite that Chinese central and local governments have been introducing tightened rules on property purchases.
Data downloaded from National Bureau of Statistics of China; chart prepared by Renee Mu.
After Chinese stock markets tumbled in January, many Chinese investors, especially individual investors, shifted their focuses to real estate, as stocks and properties are the two main investment vehicles for Chinese households. Also, in December 2015, the country released five key tasks in 2016, including to reduce home inventory. Both have contributed to rises in the housing market. The uneven development between big cities (tier-1 and 2) and small cities (tier-3 and 4) posed a dilemma for regulators to issue nationwide policies. Therefore, local governments have stepped in and introduced regulations targeting at the local regions.
Market News
China Finance Information: a finance online media administrated by Xinhua Agency.
- Officials from the PBOC Shanghai Branch hosted a meeting with executives from 25 commercial banks as well as officials from Ministry of Housing and Ministry of Land and Resources regarding tightening regulation over the local housing market. PBOC officials demand commercial banks to strictly follow rules of loan issuance and strengthen background check on mortgage applications.
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