UPDATE 1-China Sept forex outflows hit $75 bln, biggest since 2016

(Adds background, analyst quotes)

SHANGHAI/SINGAPORE, Oct 23 (Reuters) –

Capital outflows from China rose sharply to $75 billion in September, the biggest monthly figure since 2016, Goldman Sachs’ preferred gauge of foreign exchange flows showed, underscoring intensifying depreciation pressure on the yuan.

The trend was also evident in official Chinese data over the weekend with big outflows under banks’ forex sales and settlement business and through cross-border payment.

The yuan is one of Asia’s worst performing currencies this year, having dropped more than 5.5% against the dollar, amid a struggling Chinese economy and a widening gap between Chinese and U.S. yields.

“Chinese policymakers are cognisant of the negative impact from excessive RMB weakness, and are .. looking to reinforce RMB stability,” DBS strategist Chang Wei Liang said, referring to Beijing’s efforts to contain the yuan’s fall and stem capital flight.

September’s outflows, nearly 80% higher than the $42 billion seen in August, were driven by current account outflows as foreign investors’ net selling of equities and bonds slowed, Goldman Sachs said in a report.

There was $35 billion in net outflows via onshore outright spot transactions last month, as well as $45 billion of net yuan payment from onshore to offshore, the Wall Street bank said.

Despite rising yuan deprecation pressure, Goldman said it is sticking to its year-end yuan forecast of 7.30 per dollar, citing Beijing’s efforts to limit the Chinese currency’s decline.

“Policymakers appear to put more weight on confidence and stability in FX management,” Goldman said.

Big outflows were also captured by official data.

China in September witnessed $19.4 billion of outflows under foreign exchange sales and settlement business for customers, the largest monthly outflows since late 2016, the State Administration of Foreign Exchange (SAFE) data showed on Friday.

Story continues

Moreover, monthly cross-border receipts and payments recorded a deficit of $53.9 billion, the biggest since February, 2016.

Pan Gongsheng, governor of the People’s Bank of China, vowed over the weekend to prevent risk contagion in stock, bond and foreign exchange markets, and to ensure the stable operation of financial markets.

Vincent Chan, China strategist at Aletheia Capital, said a big depreciation in the yuan was unlikely in the near future as Beijing has little willingness to slash interest rates further.

Chan said that Given the declining contribution of exports to China’s economy, “keeping the yuan exchange rate relatively stable is in China’s best interest.” (Reporting by Samuel Shen and Tom Westbrook; Editing by Shri Navaratnam & Simon Cameron-Moore)