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Free AccessMNI China Daily Summary: Thursday, February 24
TOP NEWS: The yuan weakened to 6.3234 against the dollar Thursday from 6.3178 Wednesday, though still hovering near a four-year high despite major global stock markets and currencies declining after Russian leader Vladimir Putin ordered an operation to demilitarize Ukraine. The PBOC set the dollar-yuan central parity rate lower at 6.3280, compared with 6.3313 set on Wednesday.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY200 billion via 7-day reverse repos with the rates unchanged at 2.10%. The operation has led to a net injection of CNY190 billion after offsetting the maturity of CNY10 billion repos today, according to Wind Information. The operation aims to maintain stable liquidity at month-end, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.1952% from the close of 2.1919% on Wednesday, Wind Information showed. The overnight repo average rose to 2.2068% from the previous 2.0491%.
BONDS: The yield on the 10-year China Government Bond was last at 2.8000%, down from 2.8025% of Wednesday's close, according to Wind Information.
STOCKS: The Shanghai Composite Index lost 1.70% to 3,429.96, while the CSI300 fell 2.03% to 4,529.32. The Hong Kong's Hang Seng Index tumbled 3.21% to 22,901.56.
FROM THE PRESS: The strengthening yuan against the U.S. dollar could see a sudden reversal following the accelerating monetary tightening by the Federal Reserve, and China should anticipate the impact of sudden money outflow on the country's financial market, the Securities Times reported citing analysts. Some offshore "hot money" has long positions in yuan and increased the holdings of China Government Bonds in 2021 amid rising global inflation risk. Should it try to flee if the yuan drops, it could shock both the forex and interest rate markets, the newspaper said citing research by Bank of China. On Wednesday, offshore yuan continued to rise near 6.3 against the dollar, touching 6.3036, the highest since April 2018, the newspaper said.
China’s interbank liquidity will likely be loose in March, as monetary injection and fiscal deposits at commercial banks rise and banks are inclined to boost credit, the China Securities Journal reported citing Zhou Maohua, a researcher with Everbright Bank. There will be relatively less maturing tools that drain liquidity next month, including CNY300 billion reverse repos and CNY100 MLF, the newspaper said. The PBOC will flexibly use various tools to keep the movement of market interest rates around policy rates, Zhou was cited as saying. The central bank injected net CNY280 billion on Tuesday and Wednesday to keep month-end liquidity stable, the newspaper said.
China's commercial banks are expected to issue about CNY2.02 trillion secondary capital and perpetual bonds to supplement capital this year, exceeding the scale in 2021, the 21st Century Business Herald reported citing analysts. Banks are also expected to issue more financial bonds to support small and micro enterprises, green development, agriculture and rural areas as policies require, the newspaper said citing analyst Li Qian with Golden Credit Rating.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.