EM ASIA CREDIT: China Vanke: Bonds on the up

China’s net supply of local government bonds is expected to decline in the fourth quarter, prompting some analysts to call for additional support measures, including further issuance of ultra-long-term special treasuries and the introduction of new policy-based financial instruments, the China Securities Journal reported. As of August 26, 76.6% of this year’s CNY1.3 trillion quota for ultra-long-term special treasuries had been issued, alongside CNY3.15 trillion of the CNY4.4 trillion in local government special bonds. The pace of issuance has already surpassed the scale recorded during the same period last year, the report said.

Actively managed foreign capital flowed into China for the first time since October 2024, driven by the A-share rally, the Securities Times reported. During Aug 14-20, the net inflow of active and passive foreign investment was CNY140 million and CNY6.84 billion, respectively, the newspaper said, citing data by EPFR. Foreign capital increased its holdings of domestic stocks and funds by a net of USD18.8 billion in May and June, reversing the overall net reduction trend of the past two years, the newspaper said, citing data by the State Administration of Foreign Exchange.

The yuan will likely remain relatively strong against the U.S. dollar in the near term, after the onshore rate reached an intraday high of 7.148 on Monday, the highest level since July 25, said Wang Qing, an analyst at Golden Credit Rating. In the longer term, the currency is likely to stay broadly stable, with limited risk of significant adjustments, Wang noted, citing China’s ample countercyclical policy tools to buffer potential export headwinds. The dollar index will face downward pressure amid Fed rate cut expectations and as tariff impacts emerge. However, Wang added, the greenback may demonstrate resilience against further declines in the later period, given its sharp H1 losses. (Source: Securities Daily)