RMB round-up: HK deposit decline, won direct trading and Italy warms up

• Singapore saw a further drop in its RMB deposits base in the first quarter of 2016. The Monetary Authority of Singapore said a preliminary reading put RMB deposits at Rmb164bn ($25bn) as of March, down 15% drop on the previous quarter and the lowest level since September 2013.  

• Hong Kong also saw another drop in RMB deposits, down 5.1% to Rmb723bn from a month earlier. This is the lowest reading since August 2013 and a 39% drop from a peak of Rmb1tr in December 2014, according to CEIC data.

• The Shanghai-Hong Kong Stock Connect, meanwhile, saw continued popularity for its southbound channel, which allows mainland residents to purchase H-shares. As of June 2, the remaining net trading quota had dropped to Rmb92.6bn, down from Rmb98.7bn on May 27. The remaining quota is just 37% of the original Rmb250bn quota. Turnover has also risen on the channel, with buy and sell orders totalling Rmb50bn in May, compared to Rmb42bn in April, a 20% increase.

• Activity on the northbound channel, meanwhile, has been much slower. The net trading quota was Rmb165bn as of June 2, just Rmb6bn less than a month earlier.

• Finally, the Hong Kong Exchange (HKEX) responded to market reports that mainland brokers were testing trading on the upcoming Shenzhen Connect channel by stating that HKEX is already technically prepared for Shenzhen Connect. 

• “We are awaiting regulatory approval and have no information about the timetable of the regulatory approval,” a spokesperson told GlobalRMB. “We expect a preparatory period of three to four months will be required by the markets on both sides following the announcement of regulatory approval.

• After issuing detailed rules for the management of companies’ stock trading suspensions on May 27, the Shanghai Stock Exchange issued a note on May stating that it was cancelling prior pending applications for suspensions and previous exemptions of information disclosures. As a result, companies that had not achieved a suspension so far would be required to file again under the new rules. The clarification of suspension rules was one of the factors that index provider MSCI had cited as obstacles to the inclusion of A-shares in its global indices.

• Direct trading of the onshore RMB (CNY) and the Korean won will begin in Shanghai this month, according to Chinese state media reports published on May 30. The market follows the establishment of RMB-won trading in Seoul in December 2014. South Korea also has a Rmb120bn RMB qualified foreign institutional investor (RQFII) quota to invest in Chinese bond and equity markets. Seoul-based asset managers have already been assigned Rmb74bn in RQFII quotas, making the country the second largest RQFII hub globally, according to GlobalRMB data.

• Industrial and Commercial Bank of China said it had signed a co-operation agreement with the Central Bank of Nigeria (CBN) and also a RMB transactions and production capacity co-operation agreement with the Dangote group, a multinational manufacturing conglomerate operating out of West Africa, the bank said on June 1.

• ICBC noted that CBN was an early adopted of RMB as a foreign exchange reserve currency, with the new co-operation agreement giving ICBC mandate to provide CBN with RMB-related financial services. The bank added that as of March 2016, it had signed on loans worth $15.6bn for 58 Africa-China cooperation projects across 20 African countries.

• The Banca d’Italia, Italy’s central bank, said in its 2015 annual report published on May 31 that it had conducted a survey on RMB usage by Italian corporates. The survey, carried out in March and April 2015, found that just 5% of corporates with more than 50 employees had received RMB for their exports to China. Overall, the central bank estimated that 10% of Italian exports to China were priced in RMB in 2015.

• Respondents to the survey said that various reasons contributed to choosing RMB: for 75% the main reason was a request by the Chinese buyers, for 40% there were specific trading agreement determining the currency to be used for trade, and 31% said using RMB was a way to match prices offered by competitors in mainland prices. Overall, more than 80% of exporters to China still use the euro as invoicing currency to avoid foreign exchange risk from adopting a different currency.

•  The RMB has made progress as a global currency, but liquidity constraints are creating bottlenecks to pushing adoption further.

• The liberalisation of access to the China interbank bond market is a landmark of China’s capital account opening process. Meanwhile, there are reasons to expect foreign investors to remain interested in RQFII and other investment schemes.

• Markets are turning bearish on the RMB ahead of the Federal Reserve decision on interest rates in June, but so far a repeat of the panic in January does not seem likely.

• More fun in the Panda bond market as the biggest deal yet is priced by China Resources Land.

The May issue of Asiamoney magazine is also out, and it’s all about RMB!

Here you can find the winners of the Asiamoney RMB Poll and the summary of our RMB market survey.