China orders foreign banks to hold yuan

OK, so that’s China… whats all this about Iranian oil? As the saying goes, the butterfly that flaps its wings in China causes a hurricane in the United States.

The Singapore dollar and the Philippine peso also advanced against the USA currency.

After being a key driver of global growth in recent years, China is now mired in a prolonged and painful slowdown amid a property slump and a huge pile of bad debts.

Jan 7 – China’s securities regulator restricted share sales by listed companies’ major shareholders, saying the move will stabilise market expectations.

China suspended its stock market circuit breaker after the mechanism helped promote sharp falls in the country’s volatile markets.

The China stock market on Wednesday wrote a finish to the two-day winning streak in which it had advanced more than 100 points or 3.3 percent.

The offshore yuan was trading 0.13 percent softer than the onshore spot at 6.5873 per dollar. Meanwhile, the offshore yuan lost one percent of its value in the week ending January 15. “That’s your first port of call-7.78”, said Chris Morrison, head of strategy and manager of Omni Partners’ Macro Fund. The Shanghai Composite Index was down 0.2 percent at 0220 GMT, while the CSI300 index was flat.

“It’s a very, very fragile status quo China is trying to maintain”.

Growth of 6.9 per cent for 2015 as a whole was still the slowest in a quarter of a century.

Because banks had the best access to China stocks, they were able to charge as much as 200 basis points on these synthetic products up until just over a year ago, according to investors, but this figure has plummeted to around 20 basis points in recent months as funds have gained direct access to China stocks through Stock Connect and their own quotas. Huachuang Securities Co. estimates the pre-holiday demand for funds include residents’ need for nearly 2 trillion yuan, quarterly tax payments siphoning off 300 billion yuan, and the average monthly drain of about 700 billion yuan due to the decrease in foreign exchange positions.

“We think in 2016, China’s economic growth will remain stable”.

“Sustained weakness in the price of oil continues to weigh on the Canadian economy”. Such has been the case for the yuan.

The PBOC has focused its efforts on the offshore Hong Kong market, soaking up the supply of yuan and pushing interbank borrowing rates for the currency to record highs earlier this week in an effort to deter bearish speculators. They will have to devalue the yuan further in order to resolve the issues plaguing the economy, not the least of which is the real estate market.

Even so, ANZ’s Qu said he expects bond yields to drop in the longer term as the central bank will ensure that liquidity remains ample.