ASIA MORNING CALL: China reform a step forward for trade deal?

Yesterday, The State Administration of Foreign Exchange (SAFE), a national agency tasked with drafting and imposing regulations which govern FX activities in China, scrapped QFII and RQFII, rules originally introduced in 2002 and 2011 that restrict investor access to RMB capital markets.
 

The Qualified Foreign Institutional Investor (QFII) measure meant China could on a selective basis give qualifying investors, often big banks and asset management firms, the license to purchase a limited scope of Chinese security products, usually special shares of listed Chinese stocks known as "A shares". Similarly, The Renminbi Qualified Foreign Institution (RQFII) initiative gave selected Hong Kong institutional firms the ability to invest in China mainland securities. 

With the removal of these restrictive investment quotas, SAFE commented in its release that "foreign institutional investors [that qualify] can now simply remit funds to carry out securities investment [in China]", ensuring "the convenience of cross-border investment and financing", no longer having to jump through a tiring amount of hoops.

The opening up of China's financial market comes at an opportune time when US-China trade talks still seem some ways apart in delivering a meaningful agreement. It puts China on the charm offensive against Trump's previous push for greater acces to China markets and with talks between the two nations set to resume in October. 

Greater access to China may also come with its caveats, however, potentially increasing the already highly volatile equity markets we see in China. As a point of reference, daily volatility in the CSI300 reached almost 45% in Q2 2019, whereas S&P500 futures were less than half of that at the time.
 

Westpac Consumer Sentiment will print at 10.30am AEST today though I wouldn't read into it too much with yesterday's NAB Business Conditions and Confidence surveys drawing little reaction. 

The sentiment measures shows % changes in an index level that consumer confidence around spending and overall economic activity. Over 2019, its whipsawed between positive and negative prints with little direction. 

Look for AUDUSD to remain rangebound between its 50D-EMA (~0.686) and 100D-EMA (~0.69) as markets retain ECB focus over the next 48 hours. 
 

SEK CPI came in weak last night at 1.4% against an expected print of 1.7%. The underwhelming print drove markets to rethink The Riksbank's hiking bias, seen last week, with a +0.80% reaction in USDSEK and +0.70% jump in EURSEK. 

While inflation at an absolute level still remains strong, I'd be wary of SEK pairs trading on headline sensitivity.