China stops reporting bond transactions by foreigners after sell-off

(Bloomberg) – China’s leading bond trading platform for foreign investors has quietly stopped providing data on their trades, a move that could raise transparency concerns in the $20 trillion debt market dollars after record outflows.

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Daily exchanges of foreign investors were last provided on May 11 by the China Foreign Exchange Trade System, according to people familiar with the matter, who asked not to be identified while discussing private information. The data showed significant net outflows of foreign capital that day, with some selling also seen on most days in April, the people said.

It’s unclear why CFETS stopped releasing the numbers, which are usually updated a day later, the people said. There was also no indication whether the move was temporary or related to the lockdown of Shanghai, the country’s onshore financial capital. A spokesperson for CFETS – which is affiliated with China’s central bank and compiles data on the so-called interbank market – did not respond to a request for comment.

Missing data adds uncertainty over capital flows in and out of China, as Covid lockdowns and questions over concrete policy support spur market volatility. Global funds sold record amounts of Chinese sovereign debt in February and March as their yield premium over Treasuries plummeted and fund managers worried about increased supply.

While China has taken significant steps in recent years to improve foreigners’ access to its debt and equity markets, international investors have long worried about the reliability of the country’s economic statistics and other data. official. These worries tend to increase during periods of economic and financial turmoil.

April delay

Domestic investor trades on the CFETS are still published, the people said. Debt traded on its platform includes sovereign, provincial, political and credit banks.

In addition to the interbank market, the largest in the country, bonds are traded on the stock exchange.

In addition to the CFETS figures, investors are also awaiting the delayed release of an April bond trading report by the Chinabond clearing house. The information, which is usually released around the 10th of each month, is a summary of custodial obligations and includes the balance of domestic debt held by foreign institutions.

A Chinabond representative told Bloomberg it was still compiling the April report and did not provide a reason for the delay. Foreign investors offloaded a record 51.8 billion yuan ($7.7 billion) of Chinese sovereign debt in March, according to Bloomberg calculations based on clearing house data.

Yuan dives

While capital outflows likely slowed overall in April, the yuan’s sudden decline during the month likely fueled selling again, according to Becky Liu, head of macro strategy for China at Standard Chartered Bank Plc. . The Chinese currency had fallen 4% against the dollar last month.

Analysts at Barclays Bank Plc and Natixis SA said overseas investors could continue to reduce their holdings of Chinese bonds as Covid lockdowns weigh on growth and a stronger dollar undermines demand for emerging market debt .

Some fund managers, including Neeraj Seth of BlackRock Inc., are still bullish on some Chinese bonds. Officials’ shift to a more supportive stance on monetary policy will be an important step that will stabilize the yuan, he said.

“The size and structure of the Chinese bond market gives you a reasonable case for debt having a place in the portfolio and that’s a trend we don’t expect to change,” said Seth, Asia-based credit manager in Singapore. The flow of speculative money into the country has been “interrupted by geopolitics and exchange rate volatility, but the longer term money is still there”, he added.

Based on bank settlement and payment data released by the State Administration of Foreign Exchange, there were $23 billion in cross-border outflows from the securities account in April, the smallest amount in a period of three months.

(Updates with BlackRock comment in 12th paragraph and SAFE data in 14th paragraph)

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