China: Marginal deterioration in September capital flows – Nomura

Analysts at Nomura note that China’s headline FX reserves in September fell by USD22.7bn m-o-m to USD3087.0bn (released on 7 October).

Key Quotes

“This was below both consensus and our forecasts of USD3105.0bn and USD3104.7bn, respectively. Adjusting for FX valuation and coupon payment effects, China’s FX reserves fell by USD24.2bn m-o-m, a slightly bigger fall than August’s USD17.4bn drop.”

“Despite a measured drift higher in USD/RMB through September (USD/CNH and USD/CNY were higher by 44bp and 61bp, respectively) – which we believe was somewhat limited by the capping of the USD/CNY fixing via counter-cyclical factor and periods of mild CNH liquidity tightening – the drop in adjusted FX reserves points to a marginal deterioration of China’s near-term capital flow dynamics, in line with some of the high-frequency flow data we track.”