CNY: HIBOR remains elevated but markets don’t care - MUFG

Derek Halpenny, European Head of GMR at MUFG, notes that the China’s overnight HIBOR level remained elevated today at 7.95%, down from 8.16% yesterday and indicative of possible intervention to limit the depreciation of CNH.

Key Quotes

“That suggests capital outflows may have picked up or at least there is a sense that capital outflows may pick up and that is encouraging renewed speculative selling of the renminbi. 

This continues to garner little attention amongst market participants. Perhaps this is down to the fact that the economic data flow has been very positive of late and hence there is no sense of general investor concern over the risk of China becoming a source of concern globally. The other factor limiting the focus on this might be increased confidence amongst investors over China’s ability to manage the movement of CNY and CNH.

Still, the longer this feature in the market persists the greater the chance is that it starts to play a role in sentiment. The fact that pressure is building on the currency once again at a time when the flow of economic news is positive is worrying and suggests potential problems going forward with China’s very large and growing corporate debt burden remaining a heavy impediment to lifting economic growth on a sustainable basis over the medium to long-term.”