Financial Services Talking Points | 08/09/2017

In today’s talking points: It is still summer for the Chinese stock markets; Chinese Yuan continue to rise amidst geopolitical tensions; ASX issues ‘please explain’ to Chinese companies; China to establish RMB 100 billion fund for regional cooperation projects with Russia.

It is still summer for the Chinese stock markets

Chinese stock markets have had a decent summer, with the Shanghai Composite Index up 8.54 per cent since June 1. This has come on the back of a new found boom from the resource stocks. There are high expectations that the Chinese stock markets will continue to climb with manufacturing benefitting from a recovering Yuan and stronger than expected global demand. Other old-school stocks from the property sector like Vanke and Poly Real Estate have also climbed.

While the Shanghai Index has done well, the Shenzhen Index has only increased by 0.18 per cent this year and this is indicative of the lack of confidence from local investors. Foreign investors, however are much more confident as demonstrated by the performance of the H shares and MSCI China.

Read more at: CNBC

Chinese Yuan continue to rise amidst geopolitical tensions

The Chinese Yuan has performed well this year, clocking in at 6.5151 against US Dollar on Tuesday, meaning it has gained more than 6 per cent this year with still almost four months to go. While other East Asian currencies have fallen amid geopolitical tensions, the Yuan has continued to increase through tighter capital controls and foreign exchange intervention. Although premature, the Yuan’s performance has even been lauded by some as the characteristics of a safe haven currency. Stability ahead of the 19th Party Congress is another reason why the Chinese government has continued to support the Yuan’s rise and halt last year’s slide.

Read more at: CNBC

ASX issues ‘please explain’ to Chinese companies

The ASX has issued ‘please explain’ to 50 Chinese companies listed on the exchange. This comes as a precautionary move after one group, Ding Sheng Xin Finance, went into suspension on August 29 after failing to submit their annual results on time without explanation.

The ‘please explain’ is precautionary in nature, as ASX seeks responses from Chinese companies on whether they are having difficulties converting renminbi (RMB) into foreign currencies. Their responses will allow ASX and investors to evaluate whether it is an isolated occurrence or if will be more wide spread. The Chinese government has issued tougher guidelines to reduce capital outflows, however Boyuan Holdings, a property group, and Chinese Magnesium have reported they have not faced any issues moving converting RMB into foreign currencies and vice versa.

Read more at: The Sydney Morning Herald

China to establish RMB 100 billion fund for regional cooperation projects with Russia

China-Russia relations continue to strengthen after an announcement by Chinese Vice Premier Wang Yang that China will set up an RMB 100 billion investment fund for regional cooperation projects between China and Russia. China will increase the scale of investment, encourage firms to invest in Russia’s Far East, as well as suggest that the Silk Road Fund also finance China-Russia joint programs. In turn, he hopes that Russia will implement preferential policies and protect the lawful interest of these Chinese firms.

Read more at: Xinhua