2014-03-27

Renminbi Depreciates 3%, Arbitrageurs Suffer Huge Losses

3% devaluation: hot money fled China to accelerate arbitrage losses
This year, facing an unprecedented devaluation of the RMB, the depreciation rate was close to 3%. Devaluation of the yuan, not only offset the 2013 full-year gains, but also a direct result of the appreciation of the RMB is expected to depreciate from the reversal.

Meanwhile, last March, RQFII-ETF funds also suffered a rare large-scale redemptions, many Hong Kong banks also raise RMB deposit interest rates in the near future, as well as other phenomena show, after being cut off arbitrage, hot money is accelerating flee.

RQFII-ETF suffered substantial redemption

RQFII fund is suffering from a rare large-scale redemptions. According to Wind data show that as of March 27, included in the statistics of 14 RQFII fund its redemption of up to 613,500,000, of which South A50 redemption is as high as 468.5 million shares were received, representing a net 3.9 billion yuan of funds outflows. In addition, Bo FA50, China CSI 300ETF [-0.87%], easy Fonda CSI 100ETF and other funds also suffered more substantial redemption.

Earlier in January, the statistics included 14 RQFII funds, net purchase of up to 229.4 million copies of the Units, including the South A50 is to get 192 million copies of I., the equivalent of 1.7 billion yuan capital inflows. However, this situation has quietly change occurred in February last year, although the magnitude of the South I. A50 still get some, but the overall trend reversal RQFII share preached redemption share of 9.87 million copies.

It is noteworthy that H-shares since March, down 0.18% Hang Seng China Enterprises Index, almost completed a small V-shaped recovery. At the same time, according to EPFR Global statistics show March 12 to March 19, China stock fund net capital outflows of more than $ 1.5 billion, the most since January 2008 biggest weekly net outflow on record. Among them, investors in China's stock-based funds have redemption amount hitting record statistics since.

Hong Kong's fund industry have pointed out that since March RQFII-ETF redemption, H shares fell and so did not see consistent data, although a portion of the hot money reflects weak data out of China's concerns, but in fact it is due to the devaluation , resulting in lack of arbitrage, promote accelerated hot money fled the facts appear.

RMB arbitrage losses

This year, facing an unprecedented devaluation of the RMB, and its magnitude was close to 3%. Spot exchange rate of RMB against the U.S. dollar from the market point of view, January 14 closing price of 6.0406 yuan, to yesterday's closing price of 6.2103 yuan, down 2.85 percent. Devaluation of the yuan, not only offset the 2013 full-year gains, but also a direct result of the appreciation of the RMB is expected to depreciate from the reversal.

BOCI commented that the yuan-dollar exchange rate has been significantly devalued since the beginning of this year, about 3%, the larger the depreciation rate, the inertia of the current market expectations of RMB appreciation has been broken, replaced by a look of RMB empty sound, In this case, the central bank has no further guidance exchange rate depreciation. If the above analysis is correct, then the next time the RMB exchange rate depreciation may slow or even stop the pace, which could again surprise exchange speculators expected.

According to the Bank for International Settlements (BIS) statistics show that Hong Kong is the total loans granted to foreign banks mainland has reached 430 billion U.S. dollars, Hong Kong banks on the mainland net debt to total debt close to 40%. With the demand for such loans usually increase the appreciation of the yuan, will be reduced when the decline in value of the renminbi.

Expected changes in the RMB arbitrageurs, is undoubtedly a blow, the Hong Kong banking sector pointed out that "a substantial devaluation of the RMB appreciation of the renminbi will bet arbitrage devastating blow. Many investors borrowing by banks in Hong Kong before you buy renminbi assets related to arbitrage RQFII etc. If in accordance with the magnitude of devaluation since the beginning of this year, investors lost arbitrage trading up $ 14 billion. "[page]

RMB arbitrage Currently, there are four: poor onshore offshore spot exchange arbitrage, NDF and DF poor exchange arbitrage, savings and loan spreads onshore offshore arbitrage, cross-currency arbitrage spreads. Moneta is a research report pointed out that the appreciation of the RMB channel, spreads and exchange differences will bring double harvest. Specifically, companies in the territory of A "deposit" and asked after issuing letters of credit to the offshore partner B, B obtained in accordance with the offshore rate corresponding amount of foreign currency loans and foreign currency payments by the sum of imported goods to the A to A; A In the onshore foreign exchange rates for the yuan. After expiration, A to obtain domestic RMB "deposit" principal and interest, and in accordance with the maturity rate of conversion of foreign currency loans to pay principal and interest and.

Grabbing Gangyin Tilly rate of RMB deposits

It is worth noting that, due to the appreciation of the renminbi is expected to be reversed, Hong Kong's offshore RMB deposits are subtle changes. Some customers based on the expected appreciation of the renminbi is already in panic selling among the renminbi. In order to deal with this situation, many Hong Kong banks to raise interest rates start dishing out tricks.

If ICBC (Asia) recently announced by March 14 until April 30 this year, the introduction of a phased incremental RMB deposit interest rate concessions, the highest annual interest rate of 4%, the highest in Hong Kong temporarily, deposit amount of 100,000 yuan, all for an average of 3.3%. CCB Asia recently introduced incentives RMB deposit interest also 3.4%. The offer is subject to the new capital 金开立, in three stages, the first stage is open from the date of deposit of 2.5% in the first 90 days, the second stage of the deposit of the first 91 to 180 days, the deposit interest rate of 3.3% in the third stage by the deposit of 181 days to 288 days, interest rate 4%.

Standard Chartered Hong Kong has also recently announced that on March 21 until the end of April, the new capital of 20,000 yuan deposit, the contractor six-month fixed deposit interest rate of 3.2% per annum and maturity interest income of $ 320 applies only to new customers, that is, did not have to hold any bank product or service in the line in the last 12 months, except for credit cards. Standard Chartered Hong Kong, Greater China, deposit and mortgage business executives Wangwei Xian and said the introduction of short-term promotions aimed hope to attract more yuan, either high or general customers, the RMB deposit interest rates seem high is an effective way to attract new customers.

In addition, DBS Bank (Hong Kong) has announced an increase of RMB fixed-rate deposit rate from 2.8% to 3%. At present, Hong Kong renminbi business bankers still maintain a high confidence. Head of Global Markets, Standard Chartered Hong Kong Ming Qiao said that last year the external atmosphere of uncertainty, the U.S. QE delisting make global markets more volatile in the second half, but also double-digit growth in RMB business, the first two months of this year also good to keep this momentum, confidence double-digit growth this year also.

Devaluation suppress the financing needs of commerce

Since January 2014, the spot exchange rate of RMB devaluation of more than 2%. In this round of devaluation in the commodity markets also fluctuate significantly, which is the market dubbed "Dr. Copper" metallic copper financing needs first name is suppressed, causing panic copper fell, the cumulative drop of more than 12% since the beginning.

Analysts pointed out that devaluation leads to arbitrage commodity trade finance is compressed, such as copper, rubber and other industrial products "financial premium" slowly flowing, some traders close out their positions as soon as possible, the original did not enter the supply and demand side of the real goods market increased social pressure on the stock price in the short term remains to be suppressed.

Devaluation triggered selling of goods

After February, devaluation trend seems to be accelerating. Insiders said that following week, one yuan of 0.58 percent recorded the largest increase in two years, on March 25 and 26, the spot rate continued to weaken, showing at least the short term devaluation trend is not easy to reverse.

In this context, the commodity can be spared? Obviously, for a long time, financing imports of commodities slump lay hidden. As domestic interest rates continue to rise, the bank credit limit for steel and other industries, many companies take to borrow low-interest dollars and imports of iron ore, copper and other commodities to finance, can enjoy the benefits of unilateral RMB appreciation and interest rate, which leads to iron ore , copper and other imported goods stocks continued to rise.

Insiders said that the devaluation induced selling, financing collateral as iron ore and copper, face the risk of margin calls and forced the bank realized, and therefore the first to enter the iron ore and copper plummeted. As of March 27, even the iron ore and copper futures contract in March were the cumulative drop of more than 7%. [Page]

Fu Bao Lei Lianhua metals analyst, said copper process at a later stage financing, you need to use the RMB to buy dollars to return the money, devaluation would mean the need for more yuan to buy dollars, but not like before can enjoy RMB appreciation as the profit. And during yuan fell, investment bank raised the proportion of financing copper deposit payment, advance in finance copper arbitrage settled on copper prices played a role in fueling.

Nanhua Futures in an analysis report that the slump may lead ore mill capital chain crisis. Currently more than 100 million tons of imported iron ore port, most mills' financing mine. " And all have taken the margin financing business operations with financial leverage, iron ore continuous fall, steel heavy losses, but also forced margin calls, exacerbating the financial strain.

Unfavorable commodity imports

With domestic funds face tight, more and more goods with a stronger financial attributes, which now includes iron ore, soybeans, palm oil, rubber, zinc, aluminum, gold, copper, and nickel, which also makes include copper contains a variety of commodities within the "Financial premium" in the price, because the market for the financing of the Chinese commodity imports as the demand, which led to a rise in commodity prices.

Assistant Director of Finance Cheng Xiaoyong Baocheng Futures Institute, said devaluation impact on commodity markets can be analyzed from three aspects: First, the RMB devaluation will lead to lower purchasing power, is not conducive to commodity imports. Commodities such as copper and iron ore imports will be inhibited, leading to China's apparent consumption of goods declined, imports of raw materials prices; Second, the devaluation will lead to decline in the trade surplus, foreign exchange reduced compression of the renminbi liquidity, thus driving up the cost of corporate financing, making downstream replenishment will decline, increasing the opportunity cost of holding commodities. Third, the devaluation led to arbitrage trading commodities financing narrow because of the devaluation of RMB will lead to reversal of spot and forward exchange differences, increasing the cost to hedge exchange rate fluctuations, which devaluation is bad for consumer goods and for goods out of the library In a way favorable.

However, some industry insiders believe that the current devaluation so do trade financing businesses pay more attention to interest rate risk control under poor conditions favorable financing trade will continue to exist.

Long-term strength of a solid material foundation RMB

Newspaper reporter Wang Hui

For the beginning of the current round of RMB accelerated since February Zoubian mainstream institutional analysis view generally believe that macroeconomic fundamentals since 2014, starting the year, especially the weak performance of the import and export sector is the main cause of the RMB exchange rate continued to plunge . At the same time, the RMB exchange rate volatility overlay expanding the scale of the Fed's QE sustained cuts and other factors, the RMB exchange rate declines further amplification occurs to some extent. But on the other hand, integrated international payments, labor productivity and other long-term factors, the basic long-term appreciation of the RMB is still relatively strong.

Fundamentals clouds caused yuan plunge

For this round of the RMB exchange rate continued to weaken the underlying factors behind the current market mainstream generally be attributed to economic fundamentals, "not to force", especially the monthly trade deficit in February and hot money outflow has just appeared.

Haitong Securities , said in February trade has a huge deficit of $ 23 billion, reflecting the outflow of hot money is the real reason for exchange rate depreciation in February. In falling interest rates, the deficit appears in the background, does not exclude the RMB exchange rate weakness become a trend for some time. Guotai Junan also believes that in January, foreign exchange and foreign exchange settlement bank as reflected in the high growth of large-scale inflows of hot money has become in the past, is expected in February has been the outflow of hot money, March outflow will face greater pressure. In this context, the RMB is facing the reality Zoubian pressure gradually phased devaluation expectations or enhanced. Guoxin Securities (Hong Kong) is the latest view is further believed that the early performance of the RMB exchange rate weakness can be understood as the central bank initiative to guide devaluation of the Renminbi yuan to expand bilateral trading range. But on the other hand, due to the unilateral change in the expected appreciation of the adverse effects of a substantial trade deficit superimposed expected the recent devaluation pressures.

On the other hand, combining the latest in a Fed rate decision, Founder Securities number of agencies, Haitong and securities that the Fed rate hike earlier point in time, to further improve in the second quarter U.S. economic data that may occur, are likely to become the next dollar support force. In this context, the weak dollar may come to an end early. If the dollar began to enter the strong, the current round of devaluation pressure and persistence may exceed market expectations, does not exclude the RMB spot rate will depreciate to around 6.30 level.

Long-term basis the RMB exchange rate still strong

Despite short-term market parties for the RMB exchange rate is expected to depreciate further doctrinal, but in terms of long-term trend of the RMB exchange rate, most organizations still believe that viewpoint, the basis of long-term appreciation of the RMB is still relatively strong.

United States Securities pointed out that the overall balance of payments remain high and labor productivity, there is room for improvement in the future, the yuan will continue to appreciate the long-term cycle as the main feature. Analyze perspectives from BOC believes that although short-term deterioration in trading conditions and prompted the central bank to guide exchange rate devaluation, however, due to the long-term China will hold the balance of payments surplus has not changed, in order to determine the long-term renminbi foreign exchange supply and demand will be based continue to slowly appreciate. [Page]

For the full year 2014, the RMB exchange rate performance, GF Securities believes that although foreign exchange added in February than expected, but in fact, financial institutions, foreign exchange settlement this month "flow indicators" is not bad. In the case of long-term appreciation of the yuan-based and does not melt, for this year the RMB exchange rate and foreign exchange need not be too pessimistic about the overall situation.

In addition, from the Agricultural Bank of Strategic Planning Department analysis that, given the appreciation of the RMB is not conducive to the stability of unilateral export, has accumulated a large renminbi devaluation of early pressure, China's trade surplus with the United States remain a number of factors such as higher levels of recent devaluation of the RMB exchange rate is not the start of RMB devaluation, but indicates that the RMB exchange rate will return to two-way volatility trend. From 2014 full-year trend, this trend is expected to reproduce the 2012 RMB trend, namely the central parity, the real effective exchange rate will continue to rise slightly throughout the year, while the annual growth of foreign exchange, the overall pressure of hot money inflows remain relatively low.

In addition, from Hong Yuan Securities viewpoints agencies pointed out that in the RMB exchange rate "excess volatility", the monetary authorities will still be flexible intervention to prevent unilateral RMB appreciation or depreciation of unilateral excessive volatility, the current judgment of RMB long walk derogatory apparently premature.

Ye Lunjia interest position is expected to support strong dollar pattern

Although in the last few trading days, the dollar index showing a high pullback rally after hovering around the 80 mark integer. But in the last week, Fed Chairman 席耶伦 first press conference on the future rate hikes took the time to make a statement after, and the after market earlier than expected, the dollar has become a high probability event. Especially relative to other major economies to further easing, the Fed will tighten monetary policy but, given the dollar strong support.

European version of QE or hurt the euro

Many senior European Central Bank recently released a strong liberal continuous signal that the bank was ready to consider the introduction of a "major initiative" to combat low inflation risks, including negative interest rates and quantitative easing (QE) measures. Industry insiders estimate that the European Central Bank launched in April, "the European version of QE" significant increase in the probability, and the euro-dollar exchange rate will be significantly under pressure.

Next ECB meeting will be held on April 3, at its meeting in March, the European Central Bank unexpectedly took no further action, the market disappointed. Eurozone inflation in February this year, a revised annual rate of 0.7%, was the lowest since October 2013 level, further away from "less than, but close to 2%" of the target.

QE was one of the main opponents of the German Bundesbank President Weidmann recently said that the ECB's monetary policy is being discussed core issues - the effectiveness of quantitative easing, and determine whether the benefits outweigh the costs and side effects. If the inflation outlook changes, such as the euro appreciation, the ECB may intervene or cut interest rates again, and may even launch quantitative easing. In addition to opposition to QE, the ECB Weidmann is also a member of the Council of the only direct monetary transactions (OMT) program of opposition, change their attitude opens the door to quantitative easing.

Liikanen, Finland's central bank governor, said recently that the ECB still has interest rate adjustment. When asked whether the European Central Bank to buy government bonds in violation of the EU Treaty, Liikanen pointed out that "this is not a legal issue. Treaties allowed to buy from the secondary market."

Slovak central bank governor Maku He disclosed that several ECB policymakers have been prepared to take extraordinary measures to prevent the euro zone into a deflationary environment. "And that is a choice of quantitative easing ECB." European Central Bank President Mario Draghi will once again stressed that the ECB will take the necessary measures to maintain price stability, the bank are closely watching the euro exchange rate.

ECB's benchmark interest rate is currently 0.25 percent, analysts believe that although the rates have hit historic lows, but in the euro area inflation rate is still low in the background, the traditional monetary policy instruments such as interest rate cuts in the space is very limited.

Yen carry unwinding cool

Japan's accounting system requirements for settlement after settlement must be replaced yen of Japanese companies, Japanese companies in order to cope with the year end, had detached from overseas high-yield bond market out, and then replaced repatriate yen surplus in the balance sheet included in the annual After these preliminary use of the yen carry trade unwinding reflux lot of money constitutes a large Japanese yen essence buying, pushing the yen rising.

So according to common sense, basically from the beginning of February it will generate money back phenomenon. Statistics show that, after three years, the exchange rate of the U.S. dollar against the yen are weak trend in March. But this situation, the yen carry trade unwinding significant cooling, which has not scheduled a stronger exchange rate. USDJPY continued to rise since the beginning of March 18th, from the 17th closing price of 101.44 rose 27 closing price of 102.22.

Mainly due to the strong yen has not traditionally phased sectors is expected to further drain the central bank will soon. From April 1, the Japanese consumption tax rate raised from the current 5% 8% of the policy will take effect, raising the consumption tax to ease the financial burden of Japan can indeed bring "immediate" effect, subsidize certain fiscal gap quickly in the short term, but but then inhibit consumption constitutes the ultimate level of inflation in Japan, "standard", the overall mood of economic growth, as well as the financial markets will be a blow, introduced in April last year, the central bank quantitative easing monetary policy effects will also be greatly reduced.

The Bank of Japan has recently made it clear that this initiative will raise taxes temporarily lead to the country's economy into 4-6 month of negative growth. Japan Center for Economic Research recently authoritative survey results 40 economists showed that 90 percent of economists expect the Bank of Japan will take new measures this year, which the bank is expected to take measures in July proportion of economists maximum, and since April 2013 launch massive easing, the Bank of Japan has not yet taken over more policy action.

Goldman Sachs Group's latest research report predicts the central bank will set off a new round of "easing cycle" in May this year, the yen will continue to fall. Nomura Securities pointed out that Japan's economic growth for the fourth quarter of last year grew at an annual rate of 1%, far below market expectations of growth of 2.8%, highlighting the risks of its recovery is weak, and in April the Japanese consumption tax hike will bring greater pressure, it is important data is poor or procure the Bank of Japan will soon further increase monetary easing efforts. Mitsubishi Tokyo UFJ Bank Hull, research director Rafael, said the Bank of Japan is likely to be forced to further "act" in the near future, while the U.S. dollar against the yen's gains will be consolidated.

No comments:

Post a Comment