China's central bank cuts the banks' 1-Y and 5-Y Loan Prime Rate #LPR by 10 bps for the first time since August
The People’s Bank of China cut two more key lending rates on Tuesday for the first time in 10 months to prop up growth in the world’s second largest economy. The Chinese central bank cut the one-year loan prime rate by 10 basis points from 3.65% to 3.55%, and trimmed the five-year loan prime rate by 10 basis points from 4.3% to 4.2% — for the first time since August. Source: CNBC
China traders are leveraging up the most on record fluch cash
A gauge of leveraged activity in China’s
money market has notched another record as onshore financial
institutions take advantage of ample liquidity to boost
borrowing.
Turnover of so-called overnight pledged repo trades surged
to an all-time high 7.9 trillion yuan ($1.1 billion) on Tuesday.
An increase in volume may be indicative of banks using cheap
funding costs to buy bonds, even if the transactions also
include the day-to-day financing needs of firms in the market.
Source: Bloomberg
Chinese real estate bonds are negative again in 2023!
Chinese real estate bonds have turned negative since the beginning of the year, erasing its big rally earlier this year. Investor sentiment has been dampened since the collapse of one of the only offshore 2023 new issues (Wanda Group / -30pts), doubts about the ability of SOEs to meet their obligations (Sino-Ocean / -46pts) and as restructuring plans seem to be a very long way to return on investment. Yet the (modest) recovery appears to be taking hold, with new home prices and home sales rising for the second consecutive month in March and the sector growing yoy in the Q12023, after six quarters of contraction. Source: Bloomberg
Chinese bond outflows are back!
While sentiment is positive on Chinese assets due to hopes of the economic impact of the reopening, the inflows of CNY bonds lasted only one month. In January, capital outflows resumed due to fears of accelerating inflation in Asia and particularly in China as its economy reopens. It should be noted that the PBOC (People Bank of China) is one of the few central banks to maintain an accommodating monetary policy since the beginning of the COVID. Source: Bloomberg.
Foreign Investors are back in China bonds!
For the first time since January 2022, foreign investor flows into Chinese bonds returned to positive territory in December 2022, underscoring the region's supportive momentum. Despite this positive month, total foreign ownership declined in 2022 to a record $93 billion. Source: JPMorgan
First USD-denominated bond issued by a Chinese property developer since September 2021!
New positive sign for the Chinese real estate sector? After 16 months of waiting, the dollar-denominated debt market has reopened for a Chinese property developer, Wanda Properties, without any guarantee from the Chinese government. This new issue was well received by investors as the book was oversubscribed four times. However, the majority of investors were from Asia (>80%) and while this news is positive for the sector (and its liquidity problem), it does not solve the problem of sales (demand) for now. Source : Bloomberg
China's reopening is underway!
As shown by the average traffic congestion index in 10 major Chinese cities, China's domestic mobility is recovering rapidly!
