China Press Digest Sep 24: Liquidity, Property, HK Bond Sale

The following lists highlights from Chinese press reports on Friday:

• The People's Bank of China may inject liquidity by larger and more frequent use of reverse repos and rolling over maturing medium-term instruments, while a more substantial measure like an RRR cut in Q4 has become less necessary, the Securities Times reported citing analysts. The PBOC has restarted 14-day reverse repurchase operations for four consecutive trading days so to meet the increased liquidity demand by month-end, quarter-end as well as before the week-long October holiday, the newspaper said. The current tightening of liquidity is mainly due to slower fiscal expenditures, and there is room for over CNY4 trillion of fiscal spending till yearend, which can help to make up for the funding demand caused by the issuance of local government bonds.
• China's real estate market has been on a downfall and it may be difficult for housing transactions in most cities to rebound even during the upcoming week-long National Day holiday when more consumers purchase homes, said the China Youth Daily citing industry insiders. The prices of preowned homes in many cities have been falling and developers reduced land purchases in recent auctions, signalling a bearish outlook of the property sector, the newspaper said. But the current declines in home prices can be controlled and a "black swan" incident may not trigger a systemic collapse seen in other markets, where the banks and the housing markets were more intertwined, as China had placed strict policies limiting banks' lending to developers and home buyers, the newspaper said. MNI noted that the officially owned newspaper may be warning the government efforts to correct the real estate bubbles will continue while downplaying the impact on the economy from the troubled Evergrande Group, which is on the brink of a collapse partly due to the government's heavy-handed measures.
• China's issuance of CNY8 billion government bonds in Hong Kong has lifted the city's standing as an offshore yuan hub, improved the yield curve of offshore yuan government bonds, and demonstrated a strong demand for yuan assets as the bonds were oversubscribed two to three times, the China Securities Journal reported. The Ministry of Finance is scheduled to conduct two more rounds of sales of CNY6 billion in conjunction with the city, the first of which will take place Oct. 20, the newspaper said. In August, foreign institutions further increased their bond holdings by CNY8.4 billion in the inter-bank bond market. As of end-August, foreign institutions held CNY3.78 trillion of bonds on the Chinese inter-bank markets, the newspaper said.