JPMorgan Econ FI-China Greater-than-expected $bn fall in FX reserves-此为英文文档

AsiaPacificEconomicResearch

07May2024

China:Greater-than-expected$45bnfallinFXreserves

China’sAprilFXreservesmissedmarketexpectations.ReservesdeclinedUS$44.8bnto$3,200.8bn(J.P.Morganforecast:$3232.8bn,marketconsensus:$3229.5bn),thelargestmonthlyfallinmorethanhalfayear.Ourcurrentbaselineforecastlooksforexportstorise3.3%m/msaandimportstoinchup0.6%inApril,leavingthetradesurplusatanelevatedUS$79.7bn.Thedisappointmentintoday’sFXreservesreportlikelysuggestsasmaller-than-expectedtradesurplusandcurrentaccountsurplus.Goldreservesroseforthe18thconsecutivemonth,thoughatamuchslowermonthlypace.ThiswaspartlyduetoelevatedgoldpricedespitethemodestretreatinthesecondhalfofApril.FromNovember2022toApril2024,Chinahasincreaseditsgoldreservesby10.2mnoz,or+16.2%.

ImpliedcapitaloutflowreturnedtoanelevatedUS$47.0bnafterinflowsthepriortwomonths,partlyduetoassetvaluationeffectamidmarketrepricingontheFed’spivot.Underourlatestforecast,welookforthecurrentaccountsurplustoinchuptoUS$24.7bninAprilfrom$20.1bnonaveragein1Q.NotethattheUSdollarindexmovedupfrom104.5to106.2,leadingtoanestimatedcurrencyvaluationlossofUS$22.6bn.Withthat,wetentativelyestimateaUS$47.0bnimpliedcapitaloutflowforApril,afterinflowsof$6.8bninFebruary,and$10.5bninMarch.WhilewedidlookforareturnofcapitaloutflowforApril,theimpliedestimatesfromtheFXreserveschangeislargerthanexpected.WethinkthisispartlyduetovaluationeffectrelatedtoChina’sholdingofdifferentfinancialassets,suchasUSrateproductsetc,whichisnotcapturedinourvaluationadjustmentmethodology.ThePBOCdoesnotpublishofficialbreakdowndetailsforFXreserves.Basedonalternativedata,wefoundthatChina’sholdingofUStreasurieswasaround26%ptsofChina’sFXreserves,andnon-treasuryUSsecuritiesaccountedforanother19%bymid-2023.However,duetolackoftermstructurerelateddetails,itisnoteasytocomeupwithanestimatetogaugeassetvaluationeffects.InApril,the10-yearUStreasuryyieldmovedupbynearly50bpsfrom4.2%to4.69%asthemarketwasrepricingtheFed’sratecuttimingandpaceafterthehigher-than-expectedinflationreport.Direction-wise,the50bpsUSTyieldrisedidpointtoavaluationlossduetoChina’sUSTholdinginFXreserves.However,USTrelatedvaluationeffectscan’tfullyexplainthe$47.0bnelevatedimpliedcapitaloutflow.Forcomparison,wealsohada26bpgaininUSTyieldinFebruary,butthatmonthrecordedUS$6.8bnimpliedcapitalinflow.OnedifferencebetweenFebruaryandAprilworthflaggingisthattherewereUS$5.3bnequityinflowsviaStockConnectsinFebruary,incontrasttothe$9.3bnequityinflowsinApril.Asidefromthat,itisalsolikelythatthePBOCmayhaveincreaseddirectinterventionintheFXmarketbysellingFXreservesamidlingeringCNYdepreciationpressure.Butthereisinsufficientconvincingevidencetoconfirmthat.

CNYfixingisstillinthePBOC’shands,andCFETSTWIindexhaslargelyfollowedthedollarmovewithappreciationagainstmostothermajorcurrencies.Aswehavebeenflagging,thePBOChasshifteditsfocusofthemanagedfloatingRMBexchangerateregimefrom“floating”to“managed”.AmidlingeringuncertaintyaroundthetimingandpaceoftheFed’spivot,CNYassetsstillappearlessattractiveasalowyielder.With“higherforlonger”gainingmore

Seepage4foranalystcertificationandimportantdisclosures.

EmergingMarketsAsia,EconomicandPolicyResearch

TingtingGe

(852)2800-0143

tingting.ge@

HaibinZhu

(852)2800-7039

haibin.zhu@

GraceNg

(852)2800-7002

grace.h.ng@

JiYan

(852)2800-7673

ji.yan@

JPMorganChaseBank,N.A.,HongKongBranch

3

CNYexchangerate

Daily

7.4

7.2

7.0

6.8

6.6

6.4

6.2

CNY/USD

CNYfixing

Jan22Apr22Jul22Oct22Jan23Apr23Jul23Oct23Jan24Apr24

Source:BloombergFinanceL.P.,J.P.Morgan

MonthlyforeigninflowstoChinesebondmarket

USDbn

40CGBPFBNCDOthers

30

20

TingtingGe(852)2800-0143

tingting.ge@

JPMorganChaseBank,N.A.,HongKongBranch

HaibinZhu(852)2800-7039

haibin.zhu@

GraceNg(852)2800-7002

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JiYan(852)2800-7673

ji.yan@

AsiaPacificEconomicResearch

07May2024

CNYCFETSindexvsUSDDXY

USDDXY

Daily

109

CFETSindex

107

105

103

101

99

Jan23Apr23Jul23Oct23Jan24Apr24

Source:BloombergFinanceL.P.,J.P.Morgan

StockConnectnetflow

101

100

99

98

97

96

Jan'21:40.1bn

Southbound

USDbn

20

Northbound

15

10

5

10

0

0

-10

-20

-5

-10

-15

Jan-19Jan-20Jan-21Jan-22Jan-23Jan-24

Jan/18Jan/19Jan/20Jan/21Jan/22Jan/23Jan/24

Source:Wind,J.P.Morgan

Source:Haver,J.P.Morgan

4

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JPMorganChaseBank,N.A.,HongKongBranch

HaibinZhu(852)2800-7039

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AsiaPacificEconomicResearch

China:Greater-than-expected

$45bnfallinFXreserves

07May2024

Disclosures

AnalystCertification:TheResearchAnalyst(s)denotedbyan“AC”onthecoverofthisreportcertifies(or,wheremultipleResearchAnalystsareprimarilyresponsibleforthisreport,theResearchAnalystdenotedbyan“AC”onthecoverorwithinthedocumentindividuallycertifies,withrespecttoeachsecurityorissuerthattheResearchAnalystcoversinthisresearch)that:(1)alloftheviewsexpressedinthisreport

accuratelyreflecttheResearchAnalyst’spersonalviewsaboutanyandallofthesubjectsecuritiesorissuers;and(2)nopartofanyofthe

ResearchAnalyst'scompensationwas,is,orwillbedirectlyorindirectlyrelatedtothespecificrecommendationsorviewsexpressedbythe

ResearchAnalyst(s)inthisreport.ForallKorea-basedResearchAnalystslistedonthefrontcover,ifapplicable,theyalsocertify,asperKOFIA

requirements,thattheResearchAnalyst’sanalysiswasmadeingoodfaithandthattheviewsreflecttheResearchAnalyst’sownopinion,withoutundueinfluenceorintervention.

AllauthorsnamedwithinthisreportareResearchAnalystswhoproduceindependentresearchunlessotherwisespecified.InEurope,SectorSpecialists(SalesandTrading)maybeshownonthisreportascontactsbutarenotauthorsofthereportorpartoftheResearchDepartment.

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RatingsSystem:J.P.MorganusesthefollowingissuerportfolioweightingsforEmergingMarketsSovereignResearch:Overweight(overthenextthreemonths,therecommendedriskpositionisexpectedtooutperformtherelevantindex,sector,orbenchmarkcreditreturns);

Marketweight(overthenextthreemonths,therecommendedriskpositionisexpectedtoperforminlinewiththerelevantindex,sector,or

benchmarkcreditreturns);andUnderweight(overthenextthreemonths,therecommendedriskpositionisexpectedtounderperformthe

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Recommendationswillbeattheissuerlevel,andanissuerrecommendationappliestoalloftheindex-eligiblebondsatthesamelevelfortheissuer.Whenwechangetheissuer-levelrating,wearechangingtheratingforalloftheissuescovered,unlessotherwisespecified.Ratingsforquasi-sovereignissuersintheEMBIGmaydifferfromtheratingsprovidedinEMcorporatecoverage.

Valuation&Methodology:ForJ.P.Morgan'sEmergingMarketsSovereignResearch,weassignaratingtoeachsovereignissuer(Overweight,MarketweightorUnderweight)basedonourviewofwhetherthecombinationoftheissuer’sfundamentals,markettechnicals,andtherelativevalueofitssecuritieswillcauseittooutperform,performinlinewith,orunderperformthecreditreturnsoftheEMBIGDindexoverthenext

threemonths.Ourviewofanissuer’sfundamentalsincludesouropinionofwhethertheissuerisbecomingmoreorlessabletoserviceitsdebtobligationswhentheybecomedueandpayable,aswellaswhetheritswillingnesstoservicedebtobligationsisincreasingordecreasing.

J.P.MorganEmergingMarketsSovereignResearchRatingsDistribution,asofApril6,2024

Overweight

(buy)

Marketweight

(hold)

Underweight

(sell)

GlobalSovereignResearchUniverse*

12%

82%

6%

IBclients**

13%

50%

75%

*Pleasenotethatthepercentagesmaynotaddto100%becauseofrounding.

**Percentageofsubjectissuerswithineachofthe"Overweight,"Marketweight"and"Underweight"categoriesforwhichJ.P.Morganhasprovidedinvestmentbankingserviceswithintheprevious12months.

ForpurposesofFINRAratingsdistributionrulesonly,ourOverweightratingfallsintoabuyratingcategory;ourMarketweightrating

fallsintoaholdratingcategory;andourUnderweightratingfallsintoasellratingcategory.TheEmergingMarketsSovereign

ResearchRatingDistributionisattheissuerlevel.IssuerswithanNRoranNCdesignationarenotincludedinthetableabove.Thisinformationiscurrentasoftheendofthemostrecentcalendarquarter.

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OtherDisclosures

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China:Greater-than-expected

$45bnfallinFXreserves

07May2024

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