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TOP NEWS: China's financial sector is moving in a more positive direction
with the involvement of more diversified participants, Michael Taylor, the
managing director and chief credit officer for the Asia-Pacific region at
Moody's, said Friday at the annual Caixin Summit in Beijing. Taylor said 42% of
financial assets belonged to China's "Big Four" state-owned banks in 2012, while
last year the proportion fell to 28%, calling this a "welcome development." Zhi
Peng, the deputy chief executive of Tsinghua Asset Management, said at the
summit that Chinese banks are increasingly under pressure as China further opens
up its financial sector to foreign investors. Zhi stressed that Chinese banks
need to enhance their competitiveness to meet the challenge, and have an
incentive to more actively research the market and invest smartly rather than
simply wait for requests for partnerships, as they did in the past when they
dominated the market.
RATES: The Ministry of Finance and the People's Bank of China deposited
CNY120 billion in cash into the banking system for a three-month period on
Friday with a rate of 4.60%, the highest since December 2014. A total of CNY80
billion in treasury deposits matured the same day.
LIQUIDITY: The People's Bank of China injected CNY10 billion in seven-day
reverse repos, CNY10 billion in 14-day reverse repos and CNY10 billion in 63-day
reverse repos via open-market operations. This resulted in a net drain of CNY10
billion for the day, ending four consecutive trading days that the PBOC had made
net injections, as a total of CNY40 billion in reverse repos matured on Friday.
The PBOC injected a total of CNY810 billion via open-market operations this
week, the largest amount since the week of Jan. 14-20 this year. A total of
CNY122.5 billion in Medium-term Lending Facility (MLF) loans matured on
Thursday. A total of CNY80 billion in treasury deposits matured on Friday, while
the Ministry of Finance deposited CNY120 billion into the banking system on
RATES: Money market rates were lower Friday. The seven-day repo average was
last at 2.8791%, compared with Thursday's average of 2.8874%. The overnight repo
average was at 2.7141%, compared with Thursday's 2.7873%.
YUAN: The yuan was slightly stronger against the U.S. dollar after the
People's Bank of China set the fixing rate stronger for the day. The yuan was
last at 6.6321 against the U.S. unit, compared with the official closing price
of 6.6327 on Thursday. The PBOC set the yuan central parity rate at 6.6277,
0.01% stronger than Thursday's 6.6286.
BONDS: The yield on benchmark 10-year China government bonds was last at
3.9400%, compared with the previous close of 3.9167%.
STOCKS: Stocks fell, with the pharmaceuticals and technology sectors
leading losses. The benchmark Shanghai Composite Index closed down 0.48% at
3,382.91. Hong Kong's Hang Seng Index was 0.57% higher at 29,184.51.
FROM THE PRESS: The framework of macro-prudential policy needs to be
improved, and its targets should be more specific, Yin Yong, vice governor of
the People's Bank of China, said during the annual Caixin Summit, Caixin
Magazine reported Thursday. The coordination between macro-prudential policy,
monetary policy and fiscal policy is still in a testing stage because the causes
of systemic risks are complicated, Yin argued. The central bank should play a
decisive role in the framework, including controlling money supply, stabilizing
inflation and the economy, and overcoming the limitations of regulations, Yin
stressed. (Caixin Magazine)
Enterprises owned by the central government (COEs) are planning to set up a
preference share system as part of joint-stock reforms, said Xiao Yaqing,
director of the State-owned Assets Supervision and Administration Commission,
the People's Daily reported Friday. As of the end of this year, he said, all
COEs will finish overhauls of their corporation structures and will bring in
more investors, with the goal of diversifying equities. There is still a long
way to go for state-owned enterprises to form effective corporate governance
structures and flexible market-oriented operations. Many COEs rely heavily on
overseas resources, which constrains their international competitiveness, Xiao
noted. (People's Daily)
The China Securities Regulatory Commission will continue to push forward
innovation in the bond market and meet companies' requirements for issuance, Li
Chao, vice chairman of the commission, said Thursday during the Caixin Summit,
Caixin Magazine reported. The regulator will further crack down on insider
trading and illegal behavior that manipulates the market. The CSRC will
implement policies and lift restrictions on foreign investment in the Chinese
financial sector, Li noted, adding that the opening up will move forward at an
active pace. Also, the authorities will guide the futures market to grow in a
healthier way and better serve nonfinancial companies in risk management, Li
said. (Caixin Magazine)
The China Banking Regulatory Commission is planning to strengthen
regulation of commercial banks' equities and limit so-called blind investment in
banking institutions via financial products, the Shanghai Securities News
reported Friday. According to a draft of the regulations released Thursday by
the CBRC to solicit public opinion, no more than 5% of a commercial bank's
shares could be held by a single institution issuing financial products --
including funds, insurance management products and trust products. The
regulation will help prevent "barbarians" from conducting hostile takeovers via
financial products, the report argued. The draft also clarifies that one
investor or its subsidiaries cannot be a main shareholder in more than two
banks. (Shanghai Securities News)
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