MNI China Daily Summary: Friday, May 29

     EXCLUSIVE: The People's Bank of China will permit a wider trading band in

the yuan, which has come under pressure as tensions rise with the U.S. over Hong

Kong and trade, but it will act to prevent excessive volatility, sources

familiar with foreign exchange operations told MNI, with one pointing to 7.2 to

the dollar as a key level in the short term. While the yuan could trade between

6.8 and 7.4 in 2020, it is likely to end the year having depreciated from 2019's

closing price of 6.9662, one source said.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY300 billion via

7-day reverse repos with the rate unchanged at 2.2% on Friday, according to a

statement its website. The injection aims to offset the impact of government

bond issuance, business taxes and keep liquidity reasonable and ample, the PBOC

said.

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

institutions (DR007) decreased to 2.1460 from Thursday's close 2.1839%, Wind

Information showed. Overnight repo average declined to 2.0793% from 2.1133%

yesterday.

     YUAN: The yuan strengthened to 7.1455 against the dollar from Thursday's

close 7.1600. PBOC set the dollar-yuan central parity rate higher at 7.1316,

compared with the 7.1277 set on Thursday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.6975%, up

from Thursday's close of 2.6900%, according to Wind Information.

     STOCKS: The Shanghai Composite Index edged up 0.22% to 2,852.35. Hong

Kong's Hang Seng Index lost  0.74% to 22961.47. 

     FROM THE PRESS: The People's Bank of China by keeping OMO rates unchanged

indicated it does not want to keep money market rates at ultralow levels seen

previously, China Securities Journal reported quoting Ming Ming, the chief

fixed-income analyst with Citic Securities. The central bank may tap multiple

monetary policies in June including required reserve ratio cuts, Medium-term

Lending Facilities and other open market operations to maintain ample liquidity

and stabilise interest rates, the newspaper said citing Wen Bin, the chief

analyst with Minsheng Bank.

     The U.S. can punish China for drafting the Hong Kong security law with

substantive impact only by cancelling Hong Kong's separate customs status, while

keeping its special trade status for fear of damages to U.S. companies and

exports, the newspaper said. Given China's vast economy and improving

governance, it can continue to support Hong Kong's status as a global financial

centre, the newspaper said.

     The Chinese embassy in Australia on Friday strongly condemned the joint

statement by Australia, the U.K., Canada and the U.S. criticizing China for

enacting the Hong Kong security law. "Australia has many laws on its national

security issues, so what qualifies Australia to question China's legislation for

the national security for Hong Kong?" the embassy said on its website. "Hong

Kong affairs are purely China's internal affairs, and no foreign interference is

allowed," the statement read.

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

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

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