Dim Sum Bonds, Hang Seng Index, Hong Kong Dollar Exchange Rate, CNH
Bond market: Against the backdrop of widening interest rate differentials between China and the United States, the issuance of Chinese-funded US dollar bonds was weak in April, the prices of investment-grade sectors continued to be under pressure, and the high-yield sector rose for six consecutive months; Since late April, a number of favorable real estate policies are expected to continue to support the performance of real estate dollar bonds. In April, the scale of offshore RMB bond issuance fell from the previous month's high, and the issuance cost of urban investment entities rose during the month. In March, the trading volume of the Northbound Bond Connect increased in activity, and the scale of bond custody of foreign institutions in the mainland's interbank market continued to increase, and the balance of the Southbound Bond Connect hit a nine-month high.
Stock market: In April, the China Securities Regulatory Commission (CSRC) issued the "Five Measures for Capital Market Cooperation with Hong Kong", which are aimed at ETFs, REITs, HKD-RMB dual counters, mutual recognition of funds between China and Hong Kong and IPO in Hong Kong, which are expected to inject capital vitality into the Stock Connect and drive the recovery of the primary market of Hong Kong stocks. Under the background of the rebalancing of overseas funds during the month, Hong Kong stocks entered a technical bull market and led the world's major stock indexes. The valuation of Hong Kong stocks has recovered significantly, and the return of long-term funds still depends on the improvement of the mainland's fundamentals and policy efforts.
Forex: Against the backdrop of a strong US dollar, the Hong Kong exchange rate fluctuated in the range of 7.82-7.84 during the month, while the capital demand of Hong Kong stocks was supported. In March, offshore RMB trading activity increased significantly, and the offshore RMB clearing volume of Hong Kong's RTGS system hit a record high. During the month, the offshore RMB exchange rate was under pressure as a whole, and the inversion of the offshore exchange rate narrowed at the end of the month. In April, offshore RMB liquidity tightened overall, and CNH Hibor rose first and then fell. In the short term, under the premise that the central parity is not significantly adjusted, the USD/RMB is expected to continue to maintain a narrow range of low volatility; The offshore RMB exchange rate is expected to release pressure slowly due to countercyclical instruments such as CNH Hibor.
Review of the macro situation
Hong Kong's economy maintained its growth momentum and the export of goods strengthened. Hong Kong's GDP grew by 2.7% year-on-year in the first quarter, down from 4.3% in the fourth quarter of 2023, but positive growth for five consecutive quarters; The quarter-on-quarter increase increased to 2.3%, marking three consecutive quarters of positive growth. In terms of sub-items, Hong Kong's private consumption expenditure rose 1% year-on-year in the first quarter, down from 3.5% in the fourth quarter of 2023. Gross domestic fixed capital formation rose by only 0.3% y-o-y (previous value +17.5%). Exports of services rose 8.1% year-on-year (+21.2% previously); The year-on-year growth in total exports of goods accelerated from 2.8% to 6.7%.
In March, residential property prices in Hong Kong turned upward, and the number of negative equity mortgages hit a 20-year high. Against the backdrop of low property prices, as of the end of the first quarter, the number of residential mortgage loans in negative equity in Hong Kong exceeded 30,000, an increase of 27.5% quarter-on-quarter and 400% year-on-year respectively. The amount of residential mortgage loans in negative equity increased from HK$131.3 billion at the end of 2023 to HK$165.3 billion at the end of the first quarter of 2024. Meanwhile, the ratio of negative equity residential mortgage loans in arrears of more than three months increased from 0.03% at the end of 2023 to 0.06% at the end of the first quarter of 2024. Hong Kong's private residential price index was reported at 305.7 points in March, up more than 1% month-on-month, ending a 10-month losing streak. In the future, the current Hong Kong property market has a backlog of first-hand real estate projects, and developers continue to sell new projects with a low-price strategy, so that second-hand property prices are under pressure and remain soft, and residential property prices are expected to be difficult to rebound significantly in the short term.
1. Bond market
1.1 Chinese dollar bonds
1.1.1 Primary Market
Against the backdrop of the widening interest rate gap between China and the United States, the issuance of Chinese dollar bonds was weak in April, and the issuance of real estate bonds recorded zero. During the month, the total issuance of Chinese dollar bonds was about US$3.85 billion, a contraction of 74.3% month-on-month and a year-on-year increase of 58.3%. In terms of industries, after the debt restructuring and issuance of more than US$10 billion by Aoyuan and Zhongliang Group in March, the issuance of real estate bonds fell back to zero in April; The issuance of financial bonds was about 1.51 billion US dollars, a year-on-year and month-on-month change of +110.9% and -40.4% respectively; The issuance scale of Chengtou US dollar bonds increased by 130.9% year-on-year to US$1.258 billion. In the next three months, the overall maturity pressure of Chinese dollar bonds will remain high. In April, the maturity and repayment scale of Chinese dollar bonds was US$19.63 billion, an increase of 40.4% year-on-year and 18.5% month-on-month, respectively. About US$50.72 billion of debt is expected to mature in the next three months (excluding early repayment), of which the real estate and financial sectors are under greater pressure to repay US dollar bonds.
1.1.2 Secondary Market
The secondary market of Chinese dollar bonds diverged, and the high-yield sector rose for six consecutive months. The expectation of the Fed's interest rate cut in April was further delayed, and the U.S. dollar index and U.S. Treasury yields remained strong, and the 10-year U.S. Treasury yield hit a high of 4.73%, dragging down the performance of investment-grade Chinese U.S. dollar bonds. The mainland's economic growth in the first quarter exceeded expectations, and the main fundamental data performed steadily; In terms of real estate, since Moody's downgraded Vanke's credit negative news in March, Vanke's issuer rating was downgraded again by S&P and Moody's in April. At the beginning of May, Vanke announced a seven-fold transfer of the low-level land plot of its headquarters in Shenzhen Bay. In addition, the credit ratings of real estate companies such as Greenland, Longfor and China Overseas have also been downgraded. Since late April, Chengdu, Beijing, Tianjin, Shenzhen and other places have successively optimized the purchase restriction policy, and the Politburo meeting of the Central Committee at the end of the month proposed to "coordinate the study of policy measures to digest the stock of real estate and optimize the incremental housing", and the favorable policy continued to boost the performance of high-yield real estate dollar bonds.
During the month, the overall return index of Markit iBoxx Chinese dollar bonds fell by about 0.4%, and the investment-grade and high-yield indices changed by -0.6% and +0.9% respectively. Since May, the latest economic data such as non-farm payrolls and ISM PMI in the United States have fallen short of expectations, CPI has fallen, and the Federal Reserve's May interest rate meeting has hinted that interest rate cuts are still a high probability event within the year, and interest rate cut expectations have rebounded; The property market policies in the core cities of the mainland are expected to continue to exert force, which is expected to support the performance of the high-yield sector.
1.2 Offshore RMB bonds
The issuance of offshore renminbi bonds[1] in April fell from the previous month's high. According to Bloomberg data, a total of 104 offshore RMB bonds (excluding certificates of deposit) were issued during the month, with a total financing scale of 36.59 billion yuan (RMB, the same in this section), a month-on-month and year-on-year change of -57.2% and +32.9% respectively. Among them, the issuance scale of corporate bonds reached 25.49 billion yuan, falling from the historical high in the previous month.
In terms of government bonds, the main issuers in April were the development banks of European countries such as Germany and the Netherlands, with maturities of three years. In terms of corporate bonds, the issuance scale of financial bonds in April reached 11.66 billion yuan, accounting for 33%; During the month, a total of 9 urban investment entities issued offshore RMB bonds, a decrease of 12 from the previous month, and the financing scale totaled 5.39 billion yuan, down 50% from the previous month. During the month, the financing cost of urban investment issuers increased, with an average maturity of 2.88 years and a weighted average coupon of 5.34% (the average maturity of urban investment issuers in March 2024 was 2.7 years and the average coupon was 4.74%).
As of the end of April, the total circulation of offshore RMB bonds totaled 1,141.21 billion yuan. In April, the yield on 10-year U.S. Treasury bonds hit a new six-month high, and the inversion of the interest rate differential between China and the United States widened, narrowing since the end of the month; The offshore RMB liquidity in the Hong Kong market is generally abundant, and the issuance of dim sum bonds is expected to continue to be attractive to issuers at low cost.
1.3 Operation of Bond Connect
In March, the trading volume of the Northbound Trading of Bond Connect increased, and the scale of bond custody by foreign institutions in the mainland's interbank market continued to increase. In March 2024, the cash bond trading volume of foreign institutions in the mainland interbank bond market reached RMB1.86 trillion (RMB, the same below), with an average daily trading volume of about RMB88.5 billion, up 46.5% month-on-month and 25.5% month-on-month, and up 31% and 43.4% year-on-year respectively. In March, the trading volume of the Northbound Trading of Bond Connect increased by 49.2% to RMB1,010.5 billion from RMB677.5 billion in February, and the average daily trading volume increased by 27.9% month-on-month to RMB48.1 billion. In terms of bond types, the proportion of interbank certificates of deposit transactions increased from 18% to 20% in March. As of the end of March 2024, the custody balance of foreign institutions in the mainland's interbank bond market was close to RMB4 trillion, the highest since January 2022, accounting for 2.9% of the total custody volume of the interbank bond market. The custody volume of bonds under the Northbound Bond Connect decreased by 2.3% month-on-month to RMB737.2 billion, accounting for 18.4% of the total custody of foreign institutions in the interbank bond market. As of the end of February 2024, a total of 1,129 (+1 QoQ, the same below) foreign institutional entities have entered the interbank bond market, of which 560 (+4) have entered the market through direct investment channels, 823 (+0) have entered the market through the "Bond Connect" channel, and 254 (+3) have entered the market through both channels.
The custody balance of the Southbound Bond Connect hit a nine-month high. According to the data of the Shanghai Clearing Exchange, as of the end of March 2024, the number of "Southbound Connect" bonds under custody through the Stock Connect mode increased by 45 month-on-month to 779, and the custody balance was 419.62 billion yuan, an increase of 5.4% month-on-month, the highest since June 2023, accounting for 1.14% of the total balance of bonds under custody of the Shanghai Clearing Exchange.
Second, the stock market
2.1 Review of Hong Kong stock performance
2.1.1 Connectivity policy highlights
On 12 April, the China Securities Regulatory Commission (CSRC) issued the "Five Measures for Capital Market Co-operation with Hong Kong" to further expand the Stock Connect mechanism, consolidate Hong Kong's status as an international financial centre, and jointly promote the coordinated development of the capital markets of the two places. The relevant measures are expected to further enrich the choices of investors in Hong Kong and Hong Kong, attract more international asset management institutions to issue products in Hong Kong, bring incremental growth to the asset side of Hong Kong stocks, and attract more international capital. Specifically:
The first is to relax the scope of eligible products of equity ETFs under Stock Connect. Among them, the threshold for inclusion of mainland ETFs in Shanghai-Hong Kong Stock Connect has been adjusted from the previous "average daily asset size of not less than RMB1.5 billion in the past six months" to "not less than RMB500 million". Correspondingly, the threshold for the size of ETFs to be included in the Stock Connect has been adjusted from no less than HK$1.7 billion to no less than HK$550 million, and the weighting of stocks listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange (SZSE) in the index constituents tracked by the relevant Mainland (Hong Kong) ETFs has been lowered from no less than 90% to no less than 60%. The expansion will be completed within 3 months.
Since the inclusion of ETFs in the Stock Connect in July 2022, the number of eligible ETFs has increased from 87 in the first batch (83 for Southbound and 4 for Southbound Trading) to 149 (141 for Southbound and 8 for Southbound Trading) at the end of the first quarter of 2024. During the period, the cumulative turnover of southbound ETFs was about HK$823.9 billion, and the cumulative turnover of northbound ETFs was about RMB204.4 billion. According to the HKSAR Government's estimates, the expansion will increase the number of eligible ETF products by more than 70%. It will help further facilitate domestic and foreign investors to allocate to the capital markets of the Mainland and Hong Kong through passive investment.
The second is to include REITs in the Stock Connect. Previously, the HKSAR Government's 2024-25 Budget proposed to exempt the stamp duty charged on the transfer of REITs units and the distribution of options to market makers, so as to attract more REITs issuers and funds. As of the end of April, there were 36 REITs on the Shanghai and Shenzhen Stock Exchanges, with a total closing market capitalization of about 106.1 billion yuan, and 11 REITs on the Hong Kong Stock Exchange, with a total closing market value of about 132.2 billion Hong Kong dollars. Subsequently, the entry of REITs products into the Stock Connect is expected to enhance the attractiveness of dividend investors in the two markets.
The third is to support the inclusion of RMB stock trading counters in the Hong Kong Stock Connect. In June 2023, HKEX launched the "HKD-RMB Dual Counter Model", which allows investors to trade and settle in HKD and RMB respectively. Compared with the previous Dual Counter model, which was only available to investors on the Hong Kong Stock Exchange, after this adjustment, mainland investors will be able to directly purchase Hong Kong Stock Connect targets denominated in RMB counters through the Hong Kong Stock Connect channel. Up to now, a total of 24 Hong Kong stocks have opened Dual Counter trading[2], but the RMB counter turnover of the relevant stocks is less than 1% of their HKD turnover. At the same time, JD.com, Baidu, and Alibaba, as the leading stocks of the technology network listed in Hong Kong, have not been directly included in the Hong Kong Stock Connect for the time being, but have opened dual counter trading; The subsequent implementation of this measure will mark the first time that a secondary listed company has been indirectly included in the Hong Kong Stock Connect, which will help save the exchange cost of southbound investors in trading and obtaining dividends, and the inclusion of more individual stocks in the medium and long term is also expected to boost the vitality of Hong Kong stock trading.
Fourth, optimize the mutual recognition of funds arrangement. The new rules intend to "promote the appropriate relaxation of restrictions on the proportion of mutual recognition funds sold to foreign countries", and allow the investment management functions of recognised Hong Kong funds to be delegated to overseas asset management institutions with the same group as the managers, lifting the previous restrictions on investment institutions operating outside Hong Kong from obtaining investment management functions. At present, there are 117 Hong Kong Mutual Recognition Funds and only 48 Mainland Mutual Recognition Funds (another 6 are in the approval process), and the transaction is also "hot in the south and cold in the north": as of the end of March 2024, the cumulative net sales of mutual recognition funds issued in Hong Kong are about 25.6 billion yuan, and the mutual recognition funds in the mainland are only 970 million yuan. The implementation of the relevant measures is expected to broaden the channels for investors in the two places to allocate assets, enrich investors' diversified investment needs, and further enhance Hong Kong's status as an international asset management centre.
Fifth, we will support leading enterprises in mainland industries to list in Hong Kong. Affected by macroeconomic and secondary market fluctuations, the performance of Hong Kong stock IPOs has been weak in recent years. In 2023, the number of IPO listed companies and the amount of funds raised on the Hong Kong Stock Exchange will drop by 21.3% and 58.4% year-on-year, respectively, with small and medium-sized new shares being the mainstay. In the first quarter of 2024, the Hong Kong Stock Exchange's fundraising scale fell to the 10th place in the world. The introduction of the relevant measures is expected to further support the listing of leading enterprises in the Mainland industry in Hong Kong, reflecting the support for Hong Kong to consolidate and enhance its status as an international financial centre.
2.1.2 Primary Market
In April, the issuance activities in the primary market of Hong Kong stocks rebounded, and the issuance of tea Baidao led to a month-on-month increase in the amount of funds raised. During the month, there were 3 new listings, raising a total of HK$2.82 billion, an increase of 41.7% from the previous month. Among the new shares listed in April, Chabaidao raised a net amount of HK$2.46 billion, the largest IPO in Hong Kong since 2024; The first day of issuance of new shares in the month was broken. Since April, a total of 26 companies have submitted listing applications to the Hong Kong Stock Exchange, and as of May 3, the Hong Kong Stock Exchange has processed about 97 listing applications on the main board and GEM sectors, of which more than 90% are mainland enterprises, and the reserve of new shares in Hong Kong stocks has further expanded. In the future, the willingness of mainland leading enterprises to list in Hong Kong is still strong under the policy support, and the valuation of the Hang Seng Index is repaired, which is expected to further boost the warming of the Hong Kong stock IPO market.
2.1.3 Secondary Market
In April, Hong Kong stocks entered a technical bull market, outperforming the world's major stock indexes. On the one hand, the improvement of capital is the main driving force for the recent rise of Hong Kong stocks. The economic data released by the United States in April remained resilient overall, and the market's expectation of a Fed interest rate cut was postponed again. The uncertainty of the geopolitical situation is still high, and the volatility of U.S. stocks is lower under the influence of multiple factors. At the same time, the central bank's monetary pivot in March, but the probability of further interest rate hikes in the future has decreased, which has exacerbated the downward adjustment of Japanese stocks and the depreciation of the yen. In the context of the rebalancing of overseas funds, the attractiveness of US and Japanese stocks has declined, while the low valuation advantage of Hong Kong stocks has further emerged, attracting foreign capital inflows. On the other hand, the rise of Hong Kong stocks was also supported by the favorable policies of the "five measures" of Stock Connect, and the mainland PMI maintained an expansion range in April. At the end of the month, the Politburo meeting of the CPC Central Committee released a positive signal of policy, and Beijing, Shanghai, Nanjing and other cities further optimized housing policies.
In terms of stock index performance, Hong Kong stocks maintained a narrow range in the first half of April, but started a strong rebound from April 22, and recorded the largest weekly increase since October 2011 at the end of April. At the end of the month, the Hang Seng Index closed at 17,763.03 points, up 7.4% in the month, and Hang Seng Technology rose 6.4% in April. In early May, the Hang Seng Index rose further and broke through the 18,000-point mark. All major sectors of Hong Kong stocks rose during the month, led by information technology (10.3%), financials (9.1%) and energy (8.7%). During the month, the trading volume of Hong Kong stocks continued to be active, with the average daily turnover of the Main Board expanding by about 1% month-on-month to HK$112.25 billion.
2.2 Investor Sentiment
In April, the southbound funds of the Hong Kong Stock Connect maintained a net inflow, and the northbound net inflow contracted month-on-month. In April, the cumulative net inflow of southbound funds through Hong Kong Stock Connect was HK$80.36 billion (HK$85.95 billion in March). The monthly net inflow of northbound funds under the Stock Connect decreased by 72.6% month-on-month to RMB6.02 billion. The valuation of Hong Kong stocks has recovered significantly recently, but it is still at a historically low level, and the premium of AH shares has fallen. At the end of April, the rolling price-to-earnings ratio of the Hang Seng Index (P/E TTM) closed at 9.06, at the 19.5% quantile of 10-year history; With the recovery of Hong Kong stock valuations, the Hong Kong Stock Connect AH share premium index fell further in the second half of April, falling below the average value from 2020 to 2022 in early May.
In the future, the resilience of the U.S. economy and the uncertainty of the Fed's interest rate cut pace still hinder the recovery of Hong Kong stocks' capital momentum, and the overall market of Hong Kong stocks is still driven by the mainland's fundamentals and corporate earnings. Combined with valuation indicators, the bottom allocation of Hong Kong stocks in the medium and long term is still cost-effective.
3. Foreign exchange
3.1 Hong Kong Dollar Market
3.1.1 Hong Kong Dollar Interest Rate
Hong Kong dollar liquidity remained balanced and accommodative during the month. After the end of the quarter in early April, the liquidity of the Hong Kong dollar tended to be loose, and the Hong Kong dollar short-term interbank interest rate fell in the first half of the month, and the overnight, one-month and three-month Hibor all hit the lowest levels since September 2023, and rebounded at the end of the month. As of the end of April, the overnight, 1-month and 3-month HKD Hibor closed at 5.25%, 4.3% and 4.56% respectively, changing +25.38bp, -50.16bp and -16.43bp respectively from the end of the previous month. In early April and in the second half of the month, the Hong Kong Monetary Authority (HKMA) released HK$2.124 billion of overnight funds through the discount window in response to banks' funding needs, and since May, the HKMA has released a further HK$1 billion through the discount window. The interest rate differential between the United States and Hong Kong has widened in stages as Hong Kong dollar interest rates have fallen. As of the end of April, the one-month Libor-Hibor spread was 113.4bp, an increase of 48.9bp from the end of the previous month.
3.1.2 Hong Kong and Dollar Exchange Rate Trends
Against the backdrop of a strong US dollar, the Hong Kong exchange rate fluctuated in the range of 7.82-7.84 during the month, and the capital demand of Hong Kong stocks provided support. In April, the U.S. inflation data and the Fed's hawkish statement once again delayed the expectation of interest rate cuts, and the geopolitical conflict situation pushed up risk aversion, and the U.S. dollar index once broke through the 106 mark in April, and non-U.S. currencies were generally under pressure. Since the end of the month, the latest U.S. non-farm payrolls data has been weaker than expected, and the Federal Reserve's interest rate meeting has signaled that interest rates will still be cut this year, causing the U.S. dollar index to retreat; At the same time, Hong Kong stocks started a technical rally, attracting capital inflows and supporting the Hong Kong dollar exchange rate. USDHKD fluctuated around the pivot of 7.8307 during the month, ending the month at 7.8211, and the Hong Kong dollar strengthened by 0.06% from the end of March. In the short term, the market is still pricing in a Fed interest rate cut within the year, but factors such as the resilience of U.S. fundamental data and the uncertainty of the geopolitical situation are expected to support the continued strong volatility of the U.S. dollar index. However, supported by factors such as the attraction of capital inflows in Hong Kong stocks, the distribution of dividends by Hong Kong stock companies and the continued recovery of property market transactions, the pressure on the Hong Kong exchange rate is expected to weaken overall.
3.2 Offshore RMB Market
3.2.1 Offshore RMB Pooling
In March, offshore RMB trading activity increased significantly, and the offshore RMB clearing volume of Hong Kong's RTGS system hit a record high. As of the end of March, total RMB deposits in Hong Kong amounted to RMB944.7 billion, up about 2% month-on-month and still about 19% year-on-year. The total remittances related to cross-border trade settlement increased by 17.3% month-on-month to RMB1,248.4 billion in March, up 31.5% year-on-year. In March, the liquidation amount of Hong Kong's RMB RTGS system[3] was 65.2 trillion yuan, an increase of 79.5% year-on-year and 26.1% month-on-month, respectively. The latest April data fell slightly.
3.2.2 Offshore RMB exchange rate
In April, the offshore RMB exchange rate was under pressure as a whole and rebounded at the end of the month, and the inversion of the offshore exchange rate narrowed. The U.S. dollar index was strong during the month, putting pressure on non-U.S. currencies, and the People's Bank of China said that there was still room for monetary policy, and the RMB exchange rate was under pressure as a whole during the month, and USDCNH once hit 7.27 in late April. In the second half of the month, the United States released weaker-than-expected PMI data and non-farm payrolls data, the Federal Reserve released a dovish signal, the dollar liquidity tightness is expected to ease, and the dollar index fell from a high level; USDCNH closed at 7.2510 at the end of April, and the offshore yuan strengthened by 0.05% during the month (0.68% in March). Since the second half of April, the inversion of the offshore RMB exchange rate spread has narrowed as a whole. In the short term, under the premise that the central parity is not significantly adjusted, the USD/RMB is expected to continue to maintain a narrow range of low volatility; The offshore RMB exchange rate is expected to release pressure slowly due to countercyclical instruments such as CNH Hibor. At the same time, the mainland's GDP growth rate in the first quarter exceeded expectations, the latest export PMI data showed recovery momentum, coupled with the release of favorable policies at the Politburo meeting at the end of April, and the increase in real estate support policies in many first-tier cities, which are expected to boost investor confidence and support the demand for RMB funds.
In April, the main maturity of the RMB forward NDF turned upward. During the month, the 1-month, 3-month and 1-year USDCNY NDF exchange rates fluctuated around the pivot of 7.0717, 7.0812 and 7.0092 respectively, and the implied RMB exchange rate strengthened by 0.65%, 0.43% and 0.16% respectively from the pivot of the previous month. In the derivatives market, the USD/CNH swap point continued to decline as a whole and rebounded at the end of the month. The yield on the 10-year US Treasury note hit a new six-month high during the month, and the USD/CNY swap points continued to decline from the previous month. In April, the 1-year USDCNY swap fluctuated around the pivot of -2785.3pips, down about 136pips from the March pivot, and the 1-year USDCNH swap fluctuated around the pivot of -1595.5pips, up about 177.6pips from the previous month's pivot. In April, the trading volume of USD/CNH futures standard contracts on the Hong Kong Stock Exchange was about 1.77 million, an increase of 7.1% month-on-month (+24.4% month-on-month in March); The open interest at the end of the month was 34,800, a decrease of about 4.9% month-on-month (-1% month-on-month in March); In terms of prices, the average settlement price of USD/CNH futures on the Hong Kong Stock Exchange during the month was 7.248, down 0.77% month-on-month (the average price in March was down 0.03%). During the month, the trading volume of USD/CNH options contracts on the Hong Kong Stock Exchange decreased by 46.75% month-on-month to 82 contracts, and the open interest at the end of the month was 344 contracts, an increase of 13.9% month-on-month, of which the open interest of call options increased by 1.2% month-on-month, and the open interest of put options increased by 63.9% month-on-month.
3.2.3 Offshore RMB interest rates
In April, offshore RMB liquidity tightened overall, and CNH Hibor rose first and then fell. During the month, the 1-week, 1-month, and 1-year CNH Hibor all hit the highest levels since September 2023, fluctuating around the pivot of 4.53%, 4.39%, and 3.41%, respectively, and up 137bp, 114.7bp, and 30.9bp from the previous month; In April, the average daily utilisation of the HKMA's RMB liquidity arrangement totalled RMB10.245 billion (daily aggregate quota of RMB58 billion), an increase of 10.2% from March and the highest this year. In April, onshore liquidity was abundant, and the off-shore RMB spreads widened as a whole, with the intra-month averages of 1-week, 1-month and 1-year CNH Hibor-Shibor being 267.5bp, 236.8bp and 123.8bp respectively, widening 138.4bp, 123.6bp and 40.3bp respectively from the previous monthly averages. During the month, the overall liquidity of the Hong Kong dollar was loose and the flow of CNH was newly tightened, and the inversion of CNH Hibor-HKD Hibor narrowed further, and the overnight, 1-month and 3-month spreads turned positive during the month.
Annotation:
[1] In addition to the narrow dim sum bonds issued in Hong Kong, China, the broad offshore RMB bonds excluding interbank certificates of deposit also include offshore RMB bonds issued or listed in Taiwan, Singapore, Luxembourg and Macao, China, as well as offshore RMB bonds issued in the Mainland Free Trade Zone ("Pearl Bonds").
[2] The stocks that have opened the HKD-RMB Dual Counter are: Hang Seng Bank, Sun Hung Kai Properties, SenseTime-W, Geely Automobile, China Resources Beer, HKEX, Tencent Holdings, CNOOC, China Mobile, Lenovo Group, Kuaishou-W, BYD, AIA, Xiaomi Group-W, Anta Sports, Ping An of China, Li Ning, Great Wall Motor, BOCHK, Meituan-W, JD Health, JD.com-SW, Baidu Group-SW, Alibaba-SW.
[3] The RMB RTGS system (also known as the RMB Clearing House Automated Transfer System, CHATS System) is the clearing bank of Bank of China (Hong Kong), which has a settlement account with the People's Bank of China and is a member of China's national modern payment system.
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