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China's Market News: Banks Report Weak Profits, Funds Suffer Major Losses

China's Market News: Banks Report Weak Profits, Funds Suffer Major Losses

2017-04-03 17:00:00
Renee Mu, Currency Analyst
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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.

- Chinese banks as well as public funds have released their 2016 annual reports.

- Revisions in the PBOC’s 1Q Monetary Policy Committee statement hint at additional measures.

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Market News

China Finance Information: a finance online media administrated by Xinhua Agency.

- The five largest Chinese banks have all released 2016 annual reports, showing continued slow growth in profits. After years of two-digit expansion, the growth in profits for the five banks all slowed down to one-digit in 2014 and continued to fall in 2015, to close to zero. The growth rates in 2016 improved slightly, though remained subdued: The profits of ICBC, Agricultural Bank of China, Bank of China, China Construction Bankand Bank of Communications expanded +0.50%, +1.80%, +2.58%, +1.53% and +1.03% respectively.

PBOC News: China’s Central Bank.

- The PBOC’s Monetary Policy Committee hosted the first-quarter meeting according to an announcement released on Saturday. Compared to the 4Q 2016 statement, the 1Q 2017 statement stays mostly the same, though with some revisions. The target of monetary policy is changed from “maintaining prudent policy and paying attention to keep it neutral” to “maintain prudent and neutral policy”, with an increasing importance in “being neutral”. This indicates that the regulator will be more cautious in managing liquidity in the effort to maintain it at “neutral” levels.

Another difference in the 1Q statement is that the regulator emphasizes to “guide” credit to grow at a proper rate, hinting at proactive intervention on distorted market moves. In fact, multiple Chinese regulators including the PBOC have launched restrictions on home loans over the past two weeks. The PBOC may continue to cooperate with other state agencies to curb lending to the housing market.

Sina News: China’s most important online media source, similar to CNN in the US. They also own a Chinese version of Twitter, called Weibo, with around 200 million active usersmonthly.

- China’s public funds (publicly offered funds) reported the worst performance in five years, according to their 2016 annual reports. The net loss of public funds hit -175.4 billion Yuan, the first net loss since 2011. This is mostly driven by weak Chinese equities as well as the end of a bull market in bonds. In terms of the outlook of the stock market in 2017, multiple fund managers told that they would be cautious amid tighter liquidity and look more into fundamentals of listing companies.

There are two types of funds in China, pubic funds and private funds (privately offered funds), which are under different regulations. Public funds are supervised by China Securities Regulatory Commission and required to disclose information to the public; they raise capital through public offering. On the other hand, private funds raise capital from a limit number of individuals and face less strict regulation.

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