JPMorgan will include nine Chinese government bonds into its government bond index — emerging markets. The phase-in will start in February 2020 and last for 10 months. The adjusted weight of Chinese government bonds will eventually reach 10%, Shanghai Securities News, a Chinese state-owned newspaper, reported on Wednesday.
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Fitch downgraded Hong Kong’s long-term foreign-currency issuer rating from AA+ to AA with a negative outlook on Friday morning.
It said in a report that “months of persistent conflict and violence are testing the perimeters and pliability of the "one country, two systems" framework that governs Hong Kong's relationship with the mainland”.
The ratings agency added: “Fitch expects the ‘one country, two systems’ framework to remain intact, but the gradual rise in Hong Kong's economic, financial, and socio-political linkages with the mainland implies its continued integration into China's national governance system, which will present greater institutional and regulatory challenges over time. In Fitch's view, these developments are consistent with a narrowing of the sovereign rating differential between Hong Kong and mainland China.”
China is rated A+ with a stable outlook.
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Although the official manufacturing PMI recorded by the National Bureau of Statistics (NBS) dipped from 49.7 to 49.5 in August, the Caixin manufacturing PMI rose by 0.5 percentage points to 50.4.
The production sub-index increased by 0.9 percentage point to 51 and the new orders sub-index declined slightly by 0.1 percentage point to 50.1.
“Sub-indexes suggest stronger production, better employment growth and lower inflationary pressures in the manufacturing sector,” according to Maggie Wei, a China economist at Goldman Sachs. “Export frontloading ahead of higher tariffs and production front-loading ahead of a potential shutdown before October 1 National Day might have contributed to the better Caixin manufacturing PMI reading in August.”
Wei added that the official NBS manufacturing PMI has a higher correlation with industrial production growth than the Caixin PMI.
Meanwhile, Caixin services PMI rose to 52.1, the highest in the past quarter and up 0.5 percentage point from July. Again, China’s official figure saw the opposite trend, showing a 0.4 percentage point decline.
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Bank of Jinzhou has released its annual report for 2018. The bank was bailed out by three state-owned investors in July, including Industrial and Commercial Bank of China. It is also planning to cancel coupon payments on its dollar additional tier one bonds for a year, becoming the first Mainland lender to do so, and raising concerns among Chinese bank capital investors.
The bank’s net profit of Rmb9.1bn ($1.3bn) in 2017 dropped to a Rmb4.54bn net loss in 2018. Its non-performing loan ratio also surged to 4.99% from 1.04% a year earlier.