CNY: PBOC fixing stable again as exports recover - MUFG

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 13, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Derek Halpenny, European Head of GMR at MUFG, suggests that the key data of the week from China - the December trade report - has helped provide some stability for the financial markets with the annual change in exports accelerating from -3.7% to +2.3%.

    Key Quotes

    “The caveat though is that this is in local currency terms. In dollar terms, exports did also improve but remained negative with the annual rate improving from -6.8% to -1.4%. The consensus though was for export growth to worsen. While we could therefore conclude this as being good news, a Chinese Customs spokesman played down the improvement putting it down in part to "seasonal factors" while adding that 2016 will be another difficult year for trade. So the data is certainly enough to help restore some degree of stability to the financial markets but is unlikely to remove the fears in the markets over the slowdown in China and how that will impact global growth and commodity prices.

    One final point worth noting is that while the falling price of commodities helped push imports lower (imports -14.1% in 2015 & exports -2.8%), in volume terms demand from China was quite impressive. Crude oil imports in volume terms jumped 8.8% in December on an annual basis while iron ore imports increased 2.2% in December from a year earlier. Copper volumes were only marginally weaker at -0.3%. The 2015 trade surplus amounted to USD 595bn and given FX reserves fell by USD 513bn, the data helps provide a rough picture of the extent of outflows from China in 2015.

    The Shanghai Composite has just closed 2.4% lower but the rest of Asia has generally seen gains in line with the higher close in the US yesterday. The continued stability of the PBOC fix (6.5630 today versus 6.5628 yesterday) and the removal of the CNH discount to CNY through intervention has helped to stabilise risk sentiment. However, the continued drop in crude oil prices will ensure that investor sentiment will remain very fragile even with China providing some degree of stability through better data and CNY stability.”
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