July 29, 2024 01:55 GMT
The Opportunity For China
CHINA
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- Much has been written in recent weeks about lower yields in China and growing concerns from regulators, that yields are diverging away from longer term fundamentals.
- However, there is also an argument that this represents an opportunity for issuers in the second half of the year.
- Post the completion of the Plenum and guidance on policy, regions and corporates will now assess their funding requirements for the second half of 2024.
- It is forecast that local governments could issue in excess of CNY1trillion in August and CNY750bn in September (see this link).
- However, with underlying government bond yields where they are, the risk is to the upside as issuers could take advantage of lower yields to lock in attractive funding for the remainder of 2024.
- Markets expect in the second half a cut in the Reserve Ratio Requirements by 25-50bps (per the onshore Securities Daily).
- This will provide liquidity support to financial markets, adding further support to proposed issuance plans.
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