Yuan trading is busier than ever as Trump targets China’s FX
HONG KONG: Shanghai Fuxing Group’s chairman was arrested overseas and escorted back to China on suspicion of manipulating stocks and other economic crimes, according to Shanghai’s police department.
Zhu Yidong, 36, returned to China on Wednesday, the police said in a statement on their official social media account.
He had disappeared to unknown countries after Fuxing missed an estimated 18 billion yuan (US$2.6bil) of payments to clients through private equity products from affiliated firms and itself, according to state broadcaster China Central Television.
The case highlights the determination Chinese authorities to stamp out financial wrongdoing, as they seek to cut risk from the economy and tamp down behavior that could unsettle markets.
Last week Yang Zhihui, the chairman of casino operator Landing International Development Ltd, was arrested in Cambodia in relation to a corruption investigation, Caixin reported.
Securities regulators have levied billions of yuan in fines for market manipulation over the past year.
Authorities would check Fuxing’s private fund assets and investor list to defuse risks, the Shanghai police said, without providing further details.
Fuxing and Li Weiwei, the controlling shareholder of a separate Beijing-based asset management company, used 25 institutional accounts and 436 individual accounts to manipulate the price of Dalian Insulator Group Co, more than doubling the company’s share price between June 2016 and March 2017, according to a July statement from the China Securities Regulatory Commission.
Fuxing Group, which calls itself a conglomerate on its website, said it operated in multiple industries including commercial real-estate, asset management, finance and rare metals. — Bloomberg NEW YORK: Turnover in the offshore yuan has reached unprecedented levels, spurred by US President Donald Trump’s broadsides against Chinese currency practices and the protracted trade dispute between the world’s two biggest economies.
On the FX trading platform of Cboe Global Markets, average daily volume in dollar-offshore yuan jumped to a record US$1.7bil in July, from US$421mil a year earlier.
EBS Market, NEX Group Plc’s FX trading system, also saw a new high in offshore yuan transactions last month, exceeding the previous peak by 17%.
The volumes, which represent a portion of the offshore yuan market, surged as the yuan slid for a fourth straight month.
The drop raised speculation that China was deliberately weakening the currency amid its intensifying tariff impasse with America.
Last week’s announcement by the People’s Bank of China’s (PBoC) that banks would resume use of the counter-cyclical factor in setting the yuan’s daily reference rate may further fuel activity, in the view of Brad Bechtel at Jefferies.
The fixing adjustment works to restrain market influences, meaning it will have to compete with forces such as tense trade negotiations and slowing Chinese growth. That tugof-war should increase volatility, said Bechtel.
“If anything, it creates a more tradeable market,” said Bechtel, the firm’s global head of foreign exchange. The PBoC is “pushing back against what the market’s doing, but at the same time, there are still a lot of variables.”
The offshore yuan dropped 0.2% to 6.8360 per US dollar as of 11:39am in Hong Kong yesterday. It has slumped about 6% since midJune as the two nations exchanged tit-for-tat tariff threats, adding to swings in emerging-market currencies.
The pace of the decline prompted the PBoC to ask Chinese lenders to discourage “herd behavior” and momentum-chasing in the currency.
The offshore yuan’s weakness was likely driven by the same momentum-chasers that the PBoC was trying to curtail, according to Mingze Wu, a currency trader at INTL FCStone in Singapore.
The offshore yuan “has better accessibility for speculators,” Wu said via e-mail. “As such, I would not be surprised if the increase in volume has been mostly speculative driven.”
Despite the recent declines, there’s no sign of intense positioning for further depreciation in the derivatives market or significant capital outflows.
Overseas hedge fund managers have been refraining from betting against the currency like they did a few years ago, and mainland individual investors are less keen on hoarding the dollar.
The transaction volume has also picked up in the onshore market, which is more tightly controlled by the central bank and is dominated by mainland investors.
Data from the China Foreign Exchange Trade System, an interbank trading platform affiliated with the PBoC, show that average onshore yuan turnover in late July reached the highest level since January 2017.
“The trading volume will likely hold steady at the current levels as sentiment towards the currency has stabilised, thanks to the re-introduction of the counter-cyclical factor,” said Ken Cheung, Hong Kong-based senior Asian currency strategist at Mizuho Bank Ltd. “Investors no longer feel the rush to cut their positions.”
The turbulence has made this summer the busiest in years for Cheung, with clients and media inquiring about the yuan’s decline and its implications.
Bechtel can relate. “Activity levels definitely increased across the client base,” he said. “There are those who are always involved or looking at it, but when it starts to move like this, a lot of folks jump on board.” — Bloomberg
Gendreau: All the noise of trade wars creates a little bit of sentiment on Chinese consumers. — Bloomberg Small-time player: A visitor passes a model Airbus SE A380 aircraft on display at the Etihad Group headquarters in Abu Dhabi. Fitch expects Etihad to remain the smallest among the three Persian Gulf carriers, including Emirates and Qatar Airways. — Bloomberg