MNI China Daily Summary: Friday, December 21

     TOP NEWS: 

     POLICY: China, faced with increasing economic headwinds, will broadly cut

taxes and fees, allow local government to increase special bond issuances,

continue pursuing proactive fiscal policy as well as prudent monetary policy

next year, Xinhua Hua News agency said Friday following the Central Economic

Work Conference in Beijing. 

     LIQUIDITY: Traders across China's financial markets do not expect any

concerted easing by the People's Bank of China (PBOC), despite this week's flood

of liquidity provision, as concern over currency depreciation remains to the

fore, the latest MNI China Liquidity Survey found. Despite this week's restarted

PBOC open market operations, the survey saw liquidity remaining tight ahead of

the approaching calendar year-end in both the west and China, as banks' dress up

their balance sheets to prepare for year-end regulatory requirements. "Liquidity

is tight now, as big banks are reluctant to lend short-term capital due to the

usual seasonal factors," said a trader at a commercial banks in Shanghai. The

tight conditions were reflected in the latest liquidity survey, with 77.8% of

traders seeing liquidity as tighter that last month, the most since Aug 2017 and

up from just 17.6% who saw tighter conditions last month.

     LIQUIDITY: The PBOC injected CNY30 billion via 7-day reverse repos, and

CNY20 billion through 14-day reverse repos today, adding liquidity for a fifth

straight trading day. It resulted in a net injection of CNY50 billion, as no

reverse repos mature today, according to Wind Information. The central bank said

this is to partly offset the maturity of treasury's cash deposit at commercial

banks and other factors.

     RATE: The 7-day weighted average interbank repo rate for depository

institutions (DR007) decreased to 2.5800% from Thursday's close of 2.6374%, Wind

Information showed. The overnight repo average decreased to 2.4514% from

Thursday's 2.5544%.

     YUAN: The yuan depreciated against the dollar, as USDCNY increased to

6.9019 against Thursday's close of 6.8970. The PBOC set the dollar/yuan central

parity rate at 6.8825 Friday, as the yuan strengthened from Thursday's 6.8936.

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.3200%, up from the close of 3.3050% on Thursday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 0.79% lower at

2,516.25. Hong Kong's Hang Seng Index increased 0.51% to 25,753.42.

     FROM THE PRESS: Policymakers should advance capital market reform based on

the economic situation, and stabilize growth while promoting reform, the

Securities Daily said in a commentary piece today. The comments came after the

PBOC commented Thursday about accelerating market reform. The government should

avoid a collision between reform measures and the growth target as they look to

pursue a win-win outcome, the Daily said. In the long-term, capital market

reform should boost the business environment, the main infrastructure to

stabilizing growth, the newspaper said.

     More financial activities should come under the scope of the central bank's

macro-prudential management, the Financial News said today. Macro-prudential

policies play a leading and key role in controlling systemic risks, as they can

regulate the entire financial sector and the whole financial market via

counter-cyclical and cross-market regulations, the PBOC-run newspaper said,

citing Lian Ping, chief economist at Bank of Communications.

     Strict regulation on the housing market will likely continue next year

under the long-term tone of "housing is for living not speculation", the China

Securities Journal said today. Purchase or sales limits, as well as loan

restrictions, are unlikely to be removed, the newspaper said. The housing market

will likely enter a downturn, though indicators like real estate investment, new

housing projects, land transaction volumes, and developers' funding are still in

positive territory. Sales are showing significant pressure and house prices will

continue to fall, the paper said citing Chen Cong, analysts at CITIC Securities.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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