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About Tim

China

+25 year(s) experience

Tim Cheung, Head of China products, IGM, headshot
Tim Cheung heads up IGM’s China products, keeping screens updated with the latest trading strategies, often adopted by hedge funds and institutional investors.

Since 2000, he has been working with IGM to develop a range of Chinese language products for mainland China and Hong Kong. In his current role, he’s responsible for all the China content including IGM's Chinese language services. He provides key insight on the CNH/CNY markets as well as flow commentary on the emerging Asian FX market and Asian credit.

Tim joined us in Hong Kong in 1995 from MMS International. Before that he worked in the banking sector.

Tim has a bachelor’s degree in economics from Wolverhampton University.

Analyst Articles

Articles by Tim

  • IGM Credit, IGM FX and Rates

    China Insight: Credit Bonds Will Play Catch up on More Supportive Measures

    By Tim Cheung 18 Feb 2020

    China Insight

    The authorities, MOF, PBOC and CBIRC, hosted a joint conference on Feb 7 to provide an update on supportive policies in light of the coronavirus situation. We believe the conference delivered a loosening bias tone as a nimble response to the virus outbreak. Next move following the huge liquidity injection and provision of first batch of special relending funds to more than a dozen of banks is going to be an LPR cut on 20 Feb. We expect a 10bp cut in both 1-year and 5-year LPRs on 20 Feb (chart 1), similar to the magnitude of the latest OMO rate cut. A more sizable cut may mean the policymakers are opting for more aggressive monetary easing to cushion the economic shocks arising from the coronavirus outbreak.      

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: How Does The Coronavirus Outbreak Impact Yield Curves?

    By Tim Cheung 11 Feb 2020

    China Insight

    With the coronavirus outbreak still evolving, the market signal is clear: less growth and more accommodative policy in China. Further to our forecast given in the previous issue of China Insight that "China will only achieve 4.8-5.3% GDP growth in 2020" because of the disaster, we in the current issue present our view on how the yield curves in China are being impacted. The broadening of the coronavirus outbreak in China, the lockdown of Hubei province and the extension of LNY holiday have already given a hard hit to the manufacturing sector. Due to that, we inevitably will see a fall in PMI indices in Feb and March. At worst, PMI will continue to be under downward pressure over the rest of H1. In our view, some downturn of the manufacturing sector as a result of the disaster is already priced in 5yr IRS, but a drop by 2 to 3 points in PMI from here should still be able to drive IRS much lower to sub-2016 lows. Given the strong correlation between the NBS Manufacturing PMI and 5yr CNY IRS in the past (chart 1), 5yr IRS at 2.55-2.60% appears to have priced a fall in Feb PMI to around 49.0 from January's 50.0. A further decline in PMI to the 48.0 region in March or during the March-April period, in our view, will bring 5yr IRS down further to 2.35-2.45%.      

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: Is a SARS Repeat on The Way?

    By Tim Cheung 23 Jan 2020

    China Insight

    According to the report of the Wuhan Municipal Health Commission, as of Beijing morning 22 Jan 2020, there are more than 400 confirmed cases of the Wuhan coronavirus nationwide. Meanwhile, Taiwan, Korea, Thailand, Japan and the United States also reported confirmed cases of the virus. There are growing fears that an outbreak of the virus will happen across Asia very soon, just like SARS in 2003. Looking at the Wuhan coronavirus outbreak, we find it necessary to draw on some experiences from SARS in 2003 in terms of the possible impact on the China/HK markets in coming months. After all, the genetic sequence of the Wuhan coronavirus is 80% similar to the SARS virus found in bats, civets and humans (as per K.Y. Yuen, the Chair of Infectious Diseases of the University of Hong Kong's Department of Microbiology) and the two syndromes also look very close in terms of the timing of outbreak. The Wuhan coronavirus outbreak is getting worse with more suspected and confirmed cases reported. More importantly, with the mass movement of population for Lunar New Year (LNY) getting underway we inevitably will see a sharp acceleration of transmission over the next 2-3 weeks. As such, we won't be surprised if the number of confirmed cases is already in 4-digit territory by the end of LNY holiday in mainland China. With reference to the pace of growth in the confirmed cases, many experts believe the Wuhan coronavirus now is still in the initial stage of the outbreak. Assuming it develops in a similar manner as SARS did in 2003 (chart 1), we probably will not see the peak of the number of new cases until March or April.      

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: Property Bonds See Decreasing Net Supply From Now On

    By Tim Cheung 21 Jan 2020

    China Insight 0121

    Both Chinese property stocks and bonds were doing well in Q4 last year due to an increase in home mortgage loans in percentage terms in the banking sector's aggregate loan portfolio (chart 1). This is largely attributed to a recovery of home demand.      

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: No Slowdown in Credit Clean-up in 2020

    By Tim Cheung 14 Jan 2020

    China Insight 0114

    China’s corporate bond sector ended the year 2019 with heightened concerns about defaults. With the bond exchange and tender offers by the Tewoo Group in December marking the first time a Chinese state-owned enterprise has defaulted on its USD bonds in 20 years, we are afraid that China corporate bond defaults will continue to stay elevated in 2020, no better than what we saw over the past two years. We're not surprised by an intensification of credit defaults in 2018 and 2019 given the fact that many private enterprises rushed to issue onshore bonds with a maturity of 2-3 years back in 2016. However, we also attribute the sharp increase in credit defaults over the past two years to China policymakers' intention to prioritize credit clean-up. Simply speaking, the policymakers just let defaults occur as they wanted to see over-levered corporate entities fail and restructure their indebtedness. We don't think the policymakers' attitude will change significantly in 2020. As such, there is a good chance that onshore private enterprises will continue to see their credit spreads staying wide over the next few quarters (chart 1).      

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: Year 2020 - USD/RMB in 6.9-7.2 Range, Phase-2 Deal too Tough for China

    By Tim Cheung 17 Dec 2019

    China Insight 1217

    Into year end, we continue to see USD/CNH remain highly sensitive to tariff-related news. As far as US-China trade negotiations, we think the phase-one trade deal will get done in January or February if not by the 15 December tariff deadline. At worst, the Trump administration goes ahead with the new tariffs on 15 December and then make a complete rollback once a deal gets done. We don't think a failure to get the phase-one trade deal done by 15 Dec will result in a shutdown of negotiations as both Xi and Trump do not want an escalation of US-China tensions. Our baseline scenario assumes the two sides will agree on a phase-one deal in January or February 2020 if not in December this year with partial or complete rollback of September tariffs, while China will significantly increase US agricultural imports. The rollback in tariffs could be made contingent on China meeting its commitments in the deal. It would likely also include an implicit understanding that China would confine USD/CNY to a tariff-adjusted range. A comprehensive agreement on the more contentious issues of intellectual property rights, technology transfers, and China's industrial policy will likely have to await the second phase of the deal. In our view, the phase-two deal is far more challenging to China than phase-one, so we won't be surprised if it fails to emerge before or even after the US Presidential election in November 2020. We don't expect Washington will agree to roll back the tariffs imposed prior to September unless the phase-two trade deal is worked out. Assuming a phase-one deal is reached sometime over mid-Dec to late-Feb, we expect USD/CNH will likely re-see 6.90 in Q1 amid a stabilisation or even a moderate rebound of GDP growth. Subsequently, the pair will be heading for 7.20 again in H2 (chart 1). We attribute a re-emergence of RMB depreciation pressure in H2 to Beijing's reluctance to reach a very tough phase-two deal with Washington as the US Presidential election approaches and a deterioration of China's growth momentum as we progress into 2H20 (chart 2). From the Chinese leader's perspective, it makes sense to avoid any much tougher deal with the US before the US Presidential election. However, with much stricter capital controls coming into effect in 2020, we don't think runaway RMB depreciation, like we saw in 2016, will re-surface even if China's growth outlook turns gloomy again (chart 3). At worst, any breach of 7.20 will be only temporary and marginal.  

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: Year 2020 – Growth Sluggish, While Monetary Policy Cautious

    By Tim Cheung 10 Dec 2019

    China Insight 1210

    After suffering slow growth in 2019, China will find 2020 another tough year for the economy as trade tension uncertainty continues to hurt business confidence while supply-side shock to consumer price restrains room for monetary easing in 1H20. We will unlikely see notable growth stabilisation or a rebound till 2H2020 at the earliest, provided the US-China trade tension does not escalate. China has been hardest hit by the global economic slowdown since 2Q18 due to trade tensions and its structural deleveraging. 2019 is a year of stress as trade tensions continued to escalate and policymakers further tightened property policy. The GDP growth decelerated from 6.8% in 1Q2018 to 6% in 3Q2019 and will likely reach 6.1% for full-year 2019. Further slowdown in 2020 seems unavoidable, so we won't be surprised if GDP growth sees as low as 5.7% in 2020 on a full-year basis (chart 1).

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: Bond Inflows Slow Down But RMB FX Little Impacted

    By Tim Cheung 03 Dec 2019

    China Insight 1203

    Chinese onshore bonds saw a reduction of net inflows to USD2bn in October, down 82% from a month ago (chart 1). Foreign investors' net purchase of CGBs slowed to USD2.2bn, down 70% from September. Meanwhile, policy bank notes and NCDs saw small outflows of -USD0.5bn and -USD0.8bn respectively, vs an inflow of USD2bn to each of them in September. We attributed the slowdown in bond inflows largely to bear-steepening of the CGB yield curve as a result of the growing reluctance of PBOC to ease monetary policy in an environment of rising CPI inflation.

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: PBOC Constrained by Challenging CPI Inflation

    By Tim Cheung 26 Nov 2019

    China Insight 1126

    In the Q3 monetary policy report released in the middle of this month, PBOC suggested that the less dovish stance in monetary policy that we have seen since August may continue in the coming months, given the challenging CPI inflation outlook. To avoid public misinterpretation of being "less dovish" as a signal of a shift towards tightening, PBOC on 18 November resumed the 7-day reverse repo to inject liquidity and lowered the reverse repo rate by 5bp to 2.5%, the first reverse repo rate cut in this easing cycle (chart 1). The cut aimed to lower the wholesale funding cost and then to translate into a lower corporate borrowing cost. The magnitude of the cut was small, suggesting PBOC is constrained by the accelerating CPI inflation which reached as high as 3.8% y/y in October.

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: More Small Banks in Trouble as Re-leveraging Underway

    By Tim Cheung 19 Nov 2019

    China Insight 1118

    The health of China's smaller banks has come under pressure as Yichuan Rural Commercial Bank and Yingkou Coastal bank are said to have suffered bank runs in recent weeks amid fears over poor management and liquidity issues. Earlier this year, a rare government takeover of Baoshang Bank and a state rescue of Jinzhou Bank and Hengfeng Bank raised concerns about the underlying health of hundreds of small banks in China. Admittedly, China has entered another round of re-leveraging, albeit a softer one this time. With the fundamental issue of macro leverage unsolved, we expect China's debt-to-GDP ratio, currently in the 290-300% area, to reach 320% by 2025 (chart 1).  

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: Long-Awaited MLF Rate Cut Finally Happened

    By Tim Cheung 12 Nov 2019

    China Insight 1112 1

    PBOC cut the 1-year mid-term lending facility (MLF) rate by 5bp to 3.25% on 5 November (chart 1) while rolling over the matured MLF refinancing. The cut will likely drive down the loan prime rate (LPR) further, which was left unchanged at 4.20% and will be repriced on 20 November (chart 2). As the first cut in the MLF rate in this easing cycle, it suggests PBOC is faced with growing risk of further economic slowdown. However, the magnitude of the cut is small, reflecting the degree of monetary easing is constrained by growing CPI inflation.  

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: Special Bond Issuance Will be Subdued in Q4

    By Tim Cheung 05 Nov 2019

    China Insight 1105

    Given the lower-than-budgeted fiscal revenue growth so far in 2019 (chart 1), the central government may find it difficult to fulfil its fiscal transfer budgets. As such, local governments could rely more on borrowing to support infrastructure investment. As the total local government bond issuance quota of CNY3.1tn has been fulfilled this year, the total size of extra issuance could be up to CNY2.5tn (including CNY1.3tn in general and CNY1.2tn in special) if necessary. If the government decides to fully utilize the extra special bond issuance quota within the debt ceiling, it could bring CNY2.1tn funds to the government to support infrastructure investment. However, chart 2 shows that special bond issuance has been subdued since it reached its year-high in June. Given the restricted commencement of winter construction, special bond issuance will likely remain subdued in Q4.  

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: IRS Curve Appears Too Steep to Reflect Slowdown Risk

    By Tim Cheung 29 Oct 2019

    China Insight 1029

    Real GDP growth eased to 6.0% yoy in 3Q from 6.2% in 2Q, the lower bound of the policy target range this year (chart 1).

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: The US May Consider Limiting Investments in China

    By Tim Cheung 15 Oct 2019

    China Insight 1015

    A couple of negative headlines came out on 8 October before the 13th round of US-China trade talks starts. The US blacklisted 28 Chinese entities and government agencies over human rights violations and repression in Xinjiang; White House has started looking to consider limits on the US pension investments in Chinese equities;

    Topic Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: We Are Just in Short-Lived Peace

    By Tim Cheung 01 Oct 2019

    China Insight 1001

    Ahead of high-level trade talks scheduled for the second week of October in Washington, there is the growing expectation that an interim or mini deal between the US and China will be reached there.

    Topic Industry News