China: Upside surprise in foreign reserves data - ING

Iris Pang, economist at ING, notes that China’s foreign reserves rose to a surprising $3.0617 trillion in November from $3.0531 trillion in October.

Key Quotes

“One possibility that comes to mind is that China's bond and stock market inflows in November offset the use of foreign reserves for foreign market interventions. Onshore bonds will be included in the Bloomberg Barclays Index, and A-shares will get more weight in the MSCI index next year. So, it's possible that foreign money went into these Chinese markets to prepare for an increase in demand in 2019 through passive investment indexes.”

“If capital inflows are the underlying reason for this unexpected increase, then we expect more to come in the months ahead.”

“For now, we maintain our forecast for USD/CNY and USD/CNH at 7.0 for the end of the year and 7.30, for the end of 2019.”