Trade Talks
Chinese vice ministers arrive in the US on Monday to pave the way ahead of trade talks in Washington. The vice premier Liu He will meet with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Wednesday and Thursday.
Canada's ambassador to China fired
Canada's Prime Minister Justin Trudeau fired Canada's ambassador to China after the envoy said it would be "great" if the US dropped its extradition request for a Chinese tech executive arrested in Canada. That came a day after he issued a statement saying he misspoke about the case earlier in the week and regretted saying Meng Wanzhou has a strong case against extradition. Read more...
China's first perpetual bond issued by bank
The Bank of China issued 40 billion yuan perpetual bonds on Friday, making it the first bank issuer of perpetual bonds in the country, after the authority allowed commercial banks to replenish capital with the instrument to heed government calls to aid a struggling economy. The bonds were sold at a coupon rate of 4.5%, 157 bp higher than the average yield on 5-year treasury bonds in the previous five days. The bank said the proceeds of the bonds are expected to increase the bank’s capital adequacy ratio by 0.3 percentage point. Read more...
250 billion liquidity as PBOC adjusts rules for targeted RRR cut
The PBOC launched a dynamic evaluation of the RRR for inclusive financing Friday, which made more financial institutions qualified to enjoy targeted RRR cut and that will inject about 250 billion yuan liquidity into the market, according to the central banks' statement late Friday. Earlier this month the PBOC decided to ease evaluation rules for qualifying financial institutions to enjoy lower RRR in a move to encourage financing.
The busiest day for LGB issuance to come this week
Chinese local governments are rushing to issue bonds this month after Beijing approved part of bond quota this year earlier than usual, in a move to boost infrastructure investment and government spending to boost the weakening economy amid slowing domestic demand and ongoing trade tensions with the US. A total of 417.9 billion yuan worth of LGBs will be sold this month. The upcoming Thursday will see seven LGBs be issued by six local governments, the busiest day ever in China. Read more...
More local governments cut 2019 GDP growth target
Shanghai set the target of achieving a GDP growth rate of 6%-6.5% in 2019, compared with a target of around 6.5% for 2018. The city's economy grew by 6.6% y/y last year, marking a slowdown from a 6.9% growth the previous year. That comes after several other local governments cut GDP growth targets for the year, boosting a expectation that China will set its overall GDP growth target lower for 2019.
Sinopec oil-trading arm suffered 4.65 billion yuan loss
China' state-owned oil giant Sinopec admitted a 4.65 billion yuan operating loss made by its oil-trading arm Unipec in 2018. The unit suspended two top officials in December after it suffered losses on crude oil transactions following oil price slumps. The firm was investigating risk-management flaws in the company’s hedging operations and is now operating as usual. Unipec’s trading loss has caught the attention of the market and the state supervisor of SOEs which vowed to better contain risks from the financial businesses of SOEs and clamp down on their financial derivative investments in 2019.
BT get telecom operating license in China
BT Group has become the first non-Chinese telecom to get a nationwide operating license in China, according to Bloomberg. That will allow the British incumbent telecom to contract directly with Chinese customers and bill them in the local currency RMB. There are two licenses involved - a domestic IP-VPN license and a nationwide ISP license. The deal is subject to be scaled up, and it's thanks to cooperation between China and the UK, the company says.
January PMI to be released Thursday
China will release its January purchasing managers’ index (PMI) on Thursday, which will offer hints on the strength of the world's second largest economy in 2019 a sharp slowdown in the second half of 2018.
Markets Review
Stocks higher
Chinese stocks closed higher on Friday, as shares of banks, property developers and insurance companies led the gains. The added 0.4% at 2601, while the Shenzhen index and the Chinext edged up 0.3% and 0.03% respectively.
Hong Kong stocks clinched a fourth straight weekly advance, helped by expectations for policy stimulus from Chinese authorities and a rally by heavyweight Tencent which got two of its online games approved by the regulator after 10-month freeze. Shares of banks also outperformed after the central bank said it would introduce a new facility to boost perpetual bonds issued by banks, which were recently approved by the authority for lenders to replenish capital.
Yuan strengthened sharply, trade talks in focus
The onshore yuan closed the night session on Friday at 6.7485 per USD, surging 390 pips from the previous trading day. The offshore yuan started trading around 6.7513 on Monday. Traders expect the yuan to fluctuate before the outcome of the trade talks.
The latest Reuters poll showed that investors turned bullish on the yuan for the first time in nearly eight months, after Sino-US trade tensions took a turn for the worse last year. Long positions on the yuan rose to their highest since mid-May with investors regaining some of their lost appetite for a currency.
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