MNI DATA IMPACT: China February Capital Outflow Pressure Grows

     BEIJING (MNI) - Chinese banks net sold foreign exchange on behalf of their

clients last month, indicating a reversal to outflow. Here are the key takeaways

from data released by the State Administration of Foreign Exchange (SAFE) on

Monday: 

     --Banks sold net CNY102.3 billion FX on behalf of clients, reversing the

net purchase of CNY103.1 billion FX in January. A greater net selling number

corresponds to larger FX outflow. The currency strengthened 0.28% against the

U.S. dollar last month following January's 2.33% gain, which may have led to

increased conversion to FX.

     --Banks' net purchases of FX forward contracts totaled CNY64.4 billion,

compared with CNY45.1 billion in January. The reduced net purchase position

suggested market participants were betting on a stronger yuan in the longer

term. 

     --Banks' total net FX selling, including both transactions with clients and

banks' proprietary trading, recorded CNY101.3 billion, reversing the net

purchase of CNY81.8 billion in January. 

     --A more accurate reading requires combining data for the first two months

to iron out seasonal volatility caused by Chinese New Year, Wang Chunying,

spokeswoman of SAFE, said in a statement. Banks sold $1.5 billion FX on average

each of the first two months, declining by 87% from the monthly average of 2H of

2018, said Wang. 

     --Goods trading created more FX inflow. FX net purchase increased under

direct investment and investment in securities, and individuals' net purchase of

FX in the first two months decreased by 19% y/y, according to Wang.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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