Another Cash Crunch At The End Of Q1? China Allows Foreigners to Buy Up to 30% of A-Share Companies

It's about time for the cash crunch to begin. SHIBOR remains low and the PBOC is still draining liquidity, but at reduced rates, which has some predicting no cash crunch at the end of Q1.

China Rate Swaps Snap Three-Day Gain as PBOC Withdrawals Reduced

The People’s Bank of China drained 26 billion yuan ($4.2 billion) by selling 28-day repurchase agreements at 4 percent today, according to a statement posted on its website. That compared with 100 billion yuan each on March 18 and in two similar operations last week. Goldman Sachs Group Inc. cut its forecast for China’s first-quarter expansion to 5 percent from 6.7 percent today. Premier Li Keqiang said yesterday the government should “strive to keep economic growth within a reasonable range.”

......Premier Li said the government will roll out policies to expand domestic demand and stabilize growth as soon as possible, according to a statement posted on the central government’s website yesterday. Reforms in administrative procedures, fiscal and financial fields, as well as state-owned companies should be pushed forward, he said at a State Council meeting in Beijing yesterday.

季末资金面趋紧 银行理财或继续下行

The sharp rise in the price of money may be subject to the following factors: First, as February's new foreign exchange significantly reduced, while the March of foreign exchange may continue to fall. Second, the central bank repurchase effects appear. Since February 18, the central bank conducted a total of 11 times repurchase operations, although efforts have been modest, but after accumulating effect on the financial side is finally starting to show. Third quarter of factors come into play, quarter or by the assessment of liquidity point of tension that may arise.

However, the industry generally believe that although a quarter of liquidity will be tight but it does not appear excessive tensions. Sealand Securities analyst Fan Xiaoyang said that the overall funds rate at the line, but more than last year, the possibility is very small. CITIC Securities research director of fixed income Deng Haiqing said that over the next seven days if the repo rate is less than 4 percent, the central bank continued to repurchase probability is larger, but it is certain that, similar to last year, June, December funding abnormal price spikes circumstances, this quarter is not reproduced.

Tight conditions, but no crunch. Although other reports say the recent rise in SHIBOR shows pre-quarter end nervousness in the financial system.

China opens door further to foreign stock investors

On a day when the stock market plunged below 2000 again and the Chinext tumbled, China announced it will allow QFII and RQFII to buy 30% of listed companies, up from 20%. Investors looking for a crisis in China also need to keep a close eye on reforms as the leadership will not let the crisis go to waste. SOE reform is already picking up speed in some provinces. The short-term picture is worsening, but the long-term picture is improving.