China: Stabilisation of March FX Reserves - Nomura
Research Team at Nomura, notes that China’s headline FX reserves rose by
USD10.3bn m-o-m in March to USD3.213trn compared with our expectation
of a small USD10.0bn decline (we forecast headline reserves at
“This headline month-on-month increase is the first since October 2015 and could initially raise the positivity on China given some signs of stabilisation in macroeconomic data.
However, adjusting for FX valuation and coupon payments, FX reserves actually continued to fall, down USD42bn m-o-m and slightly less than the USD47.9bn decline in February. The adjustment was mainly accounted for by the rally in EUR/USD in March. That said, this fall is still much smaller than expected and also smaller than the USD95.7bn drawdown in January 2016 and the USD141.6bn drawdown in December 2015.
This stabilisation of FX reserves is consistent with the view that net capital outflow pressure on RMB could have eased, a position also echoed by the State Administration of Foreign Exchange (Bloomberg, 16 March 2016) and our recent analysis.”
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