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EXCLUSIVE: A stronger Chinese yuan against the dollar is on the cards near term if the Omicron virus rocks global supply chains, policy advisors and FX experts told MNI, despite expectations the currency will lose steam in 2022 on a likely Fed rate hike and narrower trade surplus.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rates unchanged at 2.2%. The operation has led to a net drain of CNY90 billion after offsetting the maturity of CNY100 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.0470% from the close of 2.0670% on Thursday, Wind Information showed. The overnight repo average fell to 1.8993% from the previous 1.9615%.
YUAN: The currency strengthened to 6.3690 against the dollar from 6.3730 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 6.3738, compared with 6.3719 set on Thursday.
BONDS: The yield on the 10-year China Government Bond was last at 2.9300%, up from 2.9100% of Thursday's close, according to Wind Information.
STOCKS: The Shanghai Composite Index gained 0.94% to 3,607.43, while the CSI300 rose 0.92% to 4,901.02. The Hong Kong's Hang Seng Index lost 0.09% to 23,766.69.
FROM THE PRESS: Some Chinese exporters are seeing orders for Covid prevention items doubling as new outbreaks of the Omicron items cause panic around the world, the Global Times said citing industry insiders. Most orders, including for facial masks, test kits and oxygen machines, so far come from Europe and Africa, where the variant was reported to the WHO on Nov. 24, it said. China is also fast-developing vaccines targeting the Omicron variant, the newspaper said citing Zheng Zhongwei, an official at the National Health Commission and head of vaccine development.
China must find ways to attract investment into consumer services to sustain its growth, as the property-finance-local government investment triangular model has come to an end, the 21st Century Business Herald said in an editorial citing comments by Yang Weimin, a high-ranked advisor and the deputy director of the economy of the Chinese People's Political Consultative Committee. Weak Q3 growth was partly due to the falling investment in properties, Yang was cited as saying. Housing prices have entered a slow-growth era as population slows, while the high home prices in some cities are unaffordable to middle-income earners, Yang was cited as saying. China should focus more on employment even as large-scale investments may be the preferred policy choice for short-term effect, said the newspaper.
More than 10 listed companies in China are in the process of selling their real estate divisions as the authorities maintain tight controls over housing investments, the China Securities Journal reported. Many of these companies are in the agriculture and steel industries, which carry low gross profit margins and previously relied on the high-leverage and high-turnover real estate business to gain margins. The share price of Beijing Shunxin, an agricultural company, rose to a daily limit on Tuesday after the company announced sales of its real estate subsidiary. The gross profit margin of the real estate industry may fall further as some developers will suffer losses on prolonged projects with land parcels acquired at a high premium rate in the past few years, the newspaper said citing insiders.