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.
- Hong Kong Monetary Authority will publish the use of offshore Yuan liquidity beginning on November, 1st.
- The PBOC told that off-balance sheet financing will be included in evaluation of banks’ health but has not yet.
- Manufacturing and finance shares took up the largest proportions in government-led funds.
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Yuan Rates
- The offshore Yuan set new record lows on Thursday, with the USD/CNH breaking above 6.79 for the first time since it was quoted. The onshore Yuan extended losses against the U.S. Dollar as well, with USD/CNY hitting 6.7819, a fresh six-year low. Earlier in the day, the PBOC weakened the Yuan by -31 pips to 6.7736 against the Greenback.
Market News
China Finance Information: a finance online media administrated by Xinhua Agency.
- Hong Kong Monetary Authority (HKMA) designated Agricultural Bank of China and Bank of Communications as two new Primary Liquidity Providers (PLPs) for the offshore Yuan in Hong Kong on Thursday, effective immediately; the total PLPs increased from seven to nine. Also, in order to enhance the transparency of the Yuan market liquidity, the HKMA will publish information on the use of intraday and overnight RMB Liquidity Facility and the use of PLP facility beginning on November 1st. These arrangements will “strengthen the liquidity and resilience of the CNH market” and “enhance the infrastructure of the offshore RMB market in Hong Kong”, according to Norman Chan, Chief Executive of the HKMA. The full list of the nine PLPs can be found here.
- The PBOC Chief Economist Ma Jun responded to reports from multiple media that the Central Bank will add off-balance sheet financing into the Macro Prudential Assessment (MPA). Mr. Ma told that in the third quarter, the regulator will use the same measures as it did in the first two quarters to evaluate the health of banks; the Central Bank has not included off-balance sheet financing into MPA, but is studying the timing and a plan for such inclusion. He also emphasized the necessity to strengthen oversight on the fast growing off-balance products.
- Bank of China, the first Big-Four bank that released the third-quarter earnings report, shows its profits in the first nine months increased +2.48% to 134.8 billion Yuan on an annualized basis. The non-performing loans ratio increased to 1.48% from 1.47% in the second quarter, indicating slightly increased proportion of loans in default or close to default. In terms of the bank’s solvency, the capital adequacy ratio rose to 14.12% from 13.91% in the previous quarter.
The ‘Big Four’ refers to the four main Chinese banks: Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China and China Construction Bank.
Hexun News: Chinese leading online media of financial news.
- All of the five Chinese government-led funds disclosed positive earnings in the third quarter, according to their 3Q reports released of recent. Last July, China Securities Finance, 100% state-owned, set up five funds worth 200 billion Yuan. In the third quarter of this year, earnings of the five funds totaled 5.2 billion Yuan. In terms of sectors that these funds invested, manufacturing and finance industries took up the largest portions. Chinese investors, especially individual investors, often look to government-led purchases as guidance before make their own investment decisions.
- The Chinese Yuan was used in2.03% of global payments in Sepember, rising from 1.86% in the month prior, according to SWIFT. The Yuan held its position as the sixth-ranked global payments currency. In August 2015, the Yuan overtook the Yen as world’s fourth most-used currency, with a share of 2.79%.
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