China Financial Daily:China June Personal Mortgage Bal.Rmb16.6trn,Up 31%YoY

PBOC released the financial institution lending statistics report for 1H16 andretail lending continued to drive loan growth in China as monthly data showspreviously. Retail mortgage loans amounted to Rmb16.6trn at end-June, up30.9% yoy (vs. 25.5% in 1Q16) and now accounting for 55% of retail loans and16.3% of total loans, while property development loans recorded balance ofRmb5.4trn, up 10.9% yoy (vs. 13.0% in 1Q16). MSE lending was resilient withbalance reaching Rmb19.3trn at 1H16, up 15.5% yoy (vs. 10.9% and 7.3% forloans to large and medium size enterprises). As we highlighted in ourpublished reports, we favor retail-oriented banks, i.e. ICBC and CMB. Ifexcluding mortgages, China’s credit impulse actually fell below 10-yearhistorical average now (link for our June monthly report).

    Dongbei Speical Steel held the third bondholders’ meeting with investors of itsdefaulted bonds, on which the company proposed to conduct a debt-to-equityswap for 70% of debt and assume repayment obligation for the other 30%,media reported. The proposal was immediately rejected by the investors andsome investors aimed to add pressure on local government by asking forliquidation of Dongbei Special Steel. The Liaoning NDRC did not attend themeeting. In addition, according to separate media report, some institutionshave used their own money to bail out the defaulted bonds for investors.

    China must continue cutting overcapacity and absorbing overheatedinvestment in the past, according to Fan Gang, the PBOC monetary policycommittee member. Fan views China is soft landing and the last structuralreform in China economy took 8 years starting from 1992, local media reported.

    6M16 total insurance premium recorded Rmb1.9trn, up 27.3% yoy and totalinsurance assets reached Rmb14.3trn at end of June, up 15.4% from end-2015.

    Stock and investment funds were Rmb1.7trn, accounting for 13.5% of totalinsurance fund use in 1H16, according to CIRC data on its website.

    Banks sold net Rmb116bn of foreign currency for clients in June (May:Rmb67.7bn), which resulted in total FX sale for clients of Rmb1.24tr for thefirst six months, according to data released by the SAFE. Meanwhile, netposition of FX forward sale has narrowed from US$36.3bn in 1Q to US$800mnin 2Q, which reflects more stable market expectation about RMB exchangerate. The spokesman of SAFE said the pressure of capital outflow has graduallywound down in the first half and China has ample foreign exchange reservesto deal with cross-border capital flows.