China market round-up: lending rebounds in November, Chinese auto industry in danger, international renminbi usage falls

TSF, a broad measure of credit and liquidity in the Chinese economy, rebounded to Rmb1.52tn ($221bn) in November from Rmb729bn in October, according to data published by the People’s Bank of China (PBoC) on December 11.

However, on a year-on-year (YoY) basis, the 9.9% growth from November 2017 to November 2018 was actually lower than the 10.2% growth from October 2017 to October 2018.

Chinese banks extended Rmb1.25trn in new renminbi loans in November, up from Rmb697bn in October, beating analysts’ expectations.

“The fall in yields probably helped the credit supply,” Yu Song, an economist at Beijing Gao Hua Securities, wrote in a Tuesday note. “With a widespread cautious attitude in the financial sector and the real economy, underlying demand and supply of credit likely remained weak and we believe the rebound happened mainly because of the government window guidance measures.”

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Sales in the Chinese auto industry dropped 13.9% YoY to 2.55 million vehicles, the fifth consecutive monthly drop, according to data published by the China Association of Automobile Manufactures on Tuesday.

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Standard Chartered’s RGI, a measure of international renminbi usage, fell 2.1% month-on-month to 1965 points in October from 2006 points in September, according to a December 12 research note. It was the index’s first fall in six months.

The bank found that slowing growth of cross-border payments dragged down the overall RGI. But the payment slowdown extended beyond renminbi-denominated trade settlement to northbound portfolio flows in general.

After almost two years of continuous inflows, foreign investors coming from Hong Kong posted their first net outflow in October. Monthly northbound portfolio outflows reached Rmb9.6bn and Rmb33.3bn in October and November, respectively, according to the report.

Despite the drop in the index, StanChart said it still had an optimistic outlook for the dim sum and Panda bond markets next year, thanks to the improving offshore renminbi (CNH) liquidity and declining onshore bond yields.

The bank was also confident that the onshore renminbi (CNY) would remain stable following the November G20 meeting between US president Donald Trump and Chinese president Xi Jinping. The two agreed on a three month ceasefire on tariffs.

“It will take more than a 90-day tariff truce between China and the US to fuel the next RGI rally, in our view,” Kelvin Lau, senior economist for Greater China at Standard Chartered, wrote in the report. “But the mere prospect of revived negotiations has supported CNY sentiment, which should keep USDCNY from testing 7.0 for now.”

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Shanghai Shipping Exchange released China (Shanghai) Seaborne Import Index on December 11. The 100-point index system aims to capture China’s import trade volume and helps track the progress of Shanghai’s three-year plan to become an international shipping center.

In November, the Belt and Road Initiative (BRI) sub-index dropped 4.7% from October. BRI shipping volume decreased 0.5% and the Maritime Silk and Road sub-index also dropped 5.4%.

The index will be released at the beginning of every month.

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UBS Asset Management (UBS AM) appointed Raymond Yin as its new head of the onshore China business, according to a December 12 press release.

In his new role, Yin will lead the execution of UBS AM’s China strategy and further build the firm’s onshore wholly foreign-owned enterprise. The Swiss bank obtained approval to acquire a majority share of its joint venture UBS Securities last Monday.

Yin will be based in Shanghai and report to Rene Buehlmann, head of Asia Pacific at UBS AM.

Yin was previously head of the international division for Shanghai Chongyang Investment Management. Before that, he spent much of his career at Goldman Sachs.

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FX futures trading volume on the Singapore Exchange (SGX) rose above 1.7 million contracts in November, marking a 43% YoY growth, according to a newsletter published on Thursday.

USDCNH futures trading volume reached $57.6bn in November, up 30% MoM, the third-strongest month since the inception of the contract in October 2014, according to the report.

The total USDCNH trading volume in the first 11 months exceeded $450bn.  

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Four more organisations were granted the RMB Qualified Foreign Institutional Investor (RQFII) licence since the beginning of October.

Three of them, Yinhua International Capital Management, PICC Asset Management (Hong Kong), and China Post Global (UK), were granted licences in October. Bank J Safra Sarasin from Switzerland received the licence on November 20.