In the News: U.S. Treasuries Holdings; Home Prices Drop; and Stable Insurance Sector
December 18, 2018 | BY
Jacelyn JohnsonChina's U.S. Treasury bonds holdings drop for fifth month; home prices in first-tier cities decrease for the third consecutive month; and regulators see stable general and core solvency ratios for the insurance sector.
China's Holdings of U.S. Treasury Bonds Continue a Downward Spiral
China's holdings of U.S. Treasuries totaled $1.14 trillion in October, continuing a downward spiral for the fifth consecutive month and hitting the lowest this year, according to statistics released by the U.S. Treasury Department.
However, China remained the largest foreign buyer of U.S. government debt. According to a report by the Financial Times, China's appetite for U.S. government debt has come into focus due to the China-U.S. trade dispute, which has contributed to the depreciation of the renminbi, which fell to the lowest point against the U.S. dollar in October since the financial crisis.
The U.S. had increased the issuance of its government bonds since the Trump administration's tax cut was enacted last December. The fall in demand might lead to an increase on U.S. interest rates.
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First-tier Cities' Housing Prices Continue to Drop
The National Bureau of Statistics reported a continuing drop of the average price of pre-owned homes in four of China's biggest cities.
Official data showed a monthly decline of 0.6% in the average price of an existing home in November, compared to a 0.2% decline the previous month. The average sales price of previously owned homes in Beijing, Shanghai, Shenzhen and Guangzhou fell 0.4% from the previous month, and the price fell 0.1% and 0.2% in September and October respectively.
According to Paul Guan, Hong Kong partner at Paul Hastings, 2019 would be an even more volatile year for the real estate markets in mainland China and Hong Kong. “Among the volatilities and challenges, however, investors who are savvy, patient and have experienced local teams or partners may be able to seize more opportunities this year. We expect to see more deals in value-added opportunities in first-tier cities, platform-level investments, restructurings and buy-outs, mezzanine debts, as well as distressed assets.”
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Insurance Sector's Solvency Ratio Sufficient and Stable
The China Banking and Insurance Regulatory Commission noted that the insurance sector had shown a stronger capacity to fend off risks as both the general and core solvency ratios were well above the safe level.
Solvency represents the insurance companies' debt paying abilities. The general ratio demonstrates overall condition of the capital, while the core ratio is focused on high quality capital. The regulator stated that the general and core solvency ratios of 178 insurance companies stood at 245% and 234%, respectively, at the end of the second quarter of this year noting that the sector's solvency has been sufficient and stable.
Property insurance companies saw the highest general solvency ratio at 265%, followed by 254% for reinsurance companies and 241% for life insurance companies.
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