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19 Mar 2014
Flash: PBoC intervention shocks are slowing capital inflows - Nomura
FXStreet (Bali) - According to Nomura, FX purchases by Chinese financial institutions in February showed a significant slowdown in net capital inflows to USD21.1bn from USD72.3bn in January.
Key Quotes
"This is one of the weakest inflows since the May-June 2013 local liquidity squeeze and likely reflects a fall in speculative capital inflows as well as seasonality from the lunar new year holiday."
"We see risks of speculative capital inflows remaining weak in coming months given the People's Bank of China's (PBoC) sporadic USD buying stance, as well as some fears over local growth/credit risks. This slowdown in capital inflows can already be seen in weaker February trade data, as well as the fall in CNH structured product sales."
"As we highlighted, China's 18.1% y-o-y fall in February exports (54-month low) and 10.1% rise in imports were likely driven by a decline in export over-invoicing and a pickup in importer USD demand."
"The relevance of the trade account for speculative flows was highlighted in previous Ministry of Commerce estimates of false trade, which put speculative flows at close to 50% of the trade surplus in the first four months of 2013. There was also other evidence of a drop in speculative inflows in a Reuters report (14 March), which noted that CNH structured product sales have declined by 80% from the first six weeks of 2014."
Key Quotes
"This is one of the weakest inflows since the May-June 2013 local liquidity squeeze and likely reflects a fall in speculative capital inflows as well as seasonality from the lunar new year holiday."
"We see risks of speculative capital inflows remaining weak in coming months given the People's Bank of China's (PBoC) sporadic USD buying stance, as well as some fears over local growth/credit risks. This slowdown in capital inflows can already be seen in weaker February trade data, as well as the fall in CNH structured product sales."
"As we highlighted, China's 18.1% y-o-y fall in February exports (54-month low) and 10.1% rise in imports were likely driven by a decline in export over-invoicing and a pickup in importer USD demand."
"The relevance of the trade account for speculative flows was highlighted in previous Ministry of Commerce estimates of false trade, which put speculative flows at close to 50% of the trade surplus in the first four months of 2013. There was also other evidence of a drop in speculative inflows in a Reuters report (14 March), which noted that CNH structured product sales have declined by 80% from the first six weeks of 2014."