MNI China Daily Summary: Friday, March 22

     EXCLUSIVE: The increasingly dovish Federal Reserve will bolster emerging

market currencies, a member of the People's Bank of China's monetary policy

committee told MNI, and a former senior foreign exchange official said the yuan

would rally and the PBOC have more scope to boost China's economy. "I think the

Fed's stance of slowing the pace of rate hikes will help ease the pressure of

capital outflow from emerging markets and improve market confidence in the

stability of their currencies," MPC member Ma Jun said. Separately, Guan Tao,

former Director General of Balance of Payments at the State Administration of

Foreign Exchange, told MNI: "The dovish stance of Fed monetary policy will help

expand the PBOC's policy room and the yuan will see further strength as the

dollar falls in the short term."

     DATA: Bankers' Macroeconomic Heat Index recorded 36.4% in Q1, up 2

percentage points from the previous quarter, data released by the PBOC showed.

67.7% of the bankers surveyed considered the economy remains "normal", up 0.9 pp

from last quarter. 29.8% of them thought the economy was cold bias, down 2.5 pp.

The index is expected to grow higher to 39.3% in Q2. While Banker's

Macroeconomic Confidence Index rose 1.6 pp to 70.1% in Q1, the PBOC said.

     DATA: 89.7% of the 20,000 residents in 50 cities nationwide thought their

income increased or remained basically the same in Q1, increasing 0.9 pp from

last quarter, according to a survey conducted by the PBOC released on its

website today. While the Income Confidence Index saw a downward trend, declining

0.4 pp to 54%. Meanwhile, less residents, 25.9% are willing to increase buying,

down 2.8 pp. More of them, 45% prefer increasing deposit, up 0.9%. Also, 29.2%

of them prone to do more investment, up 1.9 pp. 21.5% of them plan to purchase

housing in the coming quarter.

     LIQUIDITY: The PBOC skipped open market operations for the third day,

resulting in a net drain of CNY20 billion due to the maturity of reverse repos,

according to Wind Information. Total liquidity in the banking system is at a

reasonable and ample level, said the PBOC. The PBOC has injected net CNY90

billion of liquidity via reverse repo this week, Wind Information said.

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

institutions (DR007) fell to 2.5000% from Thursday's close of 2.6814%, Wind

Information showed. The overnight repo average decreased to 2.3000% from

Thursday's 2.6637%. 

     YUAN: The yuan weakened to 6.7060 from Thursday's close of 6.6877. The PBOC

set the dollar-yuan central parity rate at 6.6944 today, compared with 6.6850 on

Thursday.

     BONDS: The yield on 10-year China Government Bond was last at 3.135%, down

2.5 bps from the close of Thursday, according to brokers.

     STOCKS: The benchmark Shanghai Composite Index rose 0.09% to 3,104.15. Hong

Kong's Hang Seng Index increased 0.14% to 29,113.36.

     FROM THE PRESS: China's growth rate could continue to fall below the 6 -

6.5% target range as current stimulus measures are short-term and insufficient,

Ming Ming, chief fixed-income analyst at CITIC Securities, wrote in a note on

Friday. A desired economic rebound make take longer and be limited in scope,

Ming said. The PBOC may use price-based monetary policy tools to stabilize the

economy, as a possible downturn in global economy may put pressures back on

risky assets, Ming said.

     The disclosure of the schedules of the next two rounds of China-US trade

talks by the Ministry of Commerce (MOFCOM) suggested that the consultations may

be entering the final stage, the Global Times reported. Disclosing the two

schedules at the same time means the result of a single round doesn't impede the

overall process, as one is normally released after another's completion, the

newspaper reported Citing Bai Ming, deputy director of the International Market

Research Institute affiliated with the MOFCOM. 

     The PBOC should cut the reserve requirement ratio at least three times this

year, the China Securities Journal reported citing Ren Zeping, chief economist

at the Evergrande Research Institute. With RRRs for large banks and small and

medium-sized banks as high as 13.5% and 11.5%, there was an opportunity for

cuts, the newspaper said citing Ren. The PBOC is more likely to cut interest

rates as a result of the Fed's interest rate hike coming to an end and the

Sino-U.S. interest rate spread expanding, along with an easing both in the

depreciation pressure on the yuan and trade tensions, Ren was reported as

saying. 

--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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]