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TOP NEWS: China is reducing tariffs on a wide range of consumer goods by an
average of almost 10 percentage points, a move analysts say advances the
government's supply-side reform agenda while it opens domestic producers to more
competition. The Ministry of Finance announced Friday that China will start to
reduce tariffs on 187 categories of consumer goods starting on Dec. 1, with an
average tariff rate for these products down to 7.7% from 17.3%. The consumer
goods include food products, healthcare products, medicines, daily necessities,
garments, home appliances and entertainment products.
POLICY: Fitch Ratings has maintained its negative outlook on China's
banking sector in 2018, saying it expects the government's continued regulatory
scrutiny to hurt profits. Fitch said in its report, "Fitch 2018 Outlook: China
Banks," that net interest margin pressures and declining profitability would
increasingly come into play for the sector, especially impacting smaller banks.
The Chinese government's crackdown on shadow-banking activities, as well as
tighter regulation in the interbank market, are expected to create drags on
profitability, although also improve transparency and rein in risks, Fitch said
in the report, which was released Friday.
RATES: Money market rates were mixed on Friday after the PBOC injected a
net CNY20 billion via open-market operations. The seven-day repo average was
last at 2.9332%, up from Thursday's average of 2.9040%. The overnight repo
average was at 2.7974% compared with Thursday's 2.8122%.
RATES: China's Ministry of Finance will issue CNY6.5 billion of government
bonds in Hong Kong on Nov. 30, the Hong Kong Monetary Authority said on its
website on Friday. A total of CNY4 billion in two-year bonds, CNY2 billion in
five-year bonds and CNY500 million in 10-year bonds will be made available for
competitive tender, the HKMA said.
YUAN: The yuan fell against the U.S. dollar Friday even though the People's
Bank of China set a much stronger daily fixing. The yuan was last at 6.5957
against the U.S. unit, dropping 0.20% compared with the official closing price
of 6.5823 on Thursday. The People's Bank of China set the yuan central parity
rate against the U.S. dollar at 6.5810 Friday, much stronger than Thursday's
6.6021. It was the third straight day the PBOC has set a stronger fixing, and it
was also the strongest fixing since Oct. 12.
LIQUIDITY: The PBOC announced on its website Friday morning that it
injected CNY30 billion in liquidity via seven-day reverse repos, CNY10 billion
via 14-day reverse repos and CNY10 billion via 63-day reverse repos, with rates
unchanged at 2.45%, 2.60% and 2.90%, respectively. The PBOC did not give further
explanations about its operations this morning. This resulted in a net injection
of CNY20 billion for the day, as a total of CNY30 billion in reverse repos
matured on Friday. The PBOC has injected a net CNY150 billion via open-market
operations this week.
BONDS: The yield on benchmark 10-year China government bonds was last at
3.9500%, down from the previous close of 4.0000%, according to Wind, a financial
STOCKS: Stocks rose, led higher by the natural gas sector and air freight
sector. The benchmark Shanghai Composite Index closed up 0.06% at 3,353.82. Hong
Kong's Hang Seng Index was 0.54% higher at 29,867.33.
FROM THE PRESS: The yuan strengthened against the dollar and the yuan
central parity rose 269 basis points Thursday, mainly due to the weakening of
the dollar, the Securities Daily reported Friday. The yuan may fluctuate around
a rate of 6.60 to the dollar. Analysts said that a drop in the dollar index
followed the release of the minutes of the U.S. central bank's Federal Open
Market Committee, showing that some committee members hesitated about the Fed
further increasing its benchmark interest rates. Also supporting the
strengthening of the yuan, recent fluctuation in the Chinese bond market have
caused the yield of 10-year treasuries to rise to more than 4%. Wang Qing, head
of the trade and finance center at the Suning Financial Research Institute, told
the newspaper that there is a high probability the People's Bank of China will
increase liquidity injections into the market. He added that in the short term,
it is unlikely the treasury yield will continue to be higher than 4%. The spread
between Chinese and U.S. treasury yields is expected to recover under the
central bank's injections, Huang said. (Securities Daily)
Regulators have clamped down on finance technology (fintech) companies,
with payday loans as a focus, Huang Zheng, head of China Finance Technology
Innovation Research Institute, wrote in an article published Friday in the
Financial News, a newspaper of the People's Bank of China. Financial regulators
have extended a risk prevention campaign because of unsolved problems in the
fintech sector. As the media has reported, the Chinese government on Tuesday did
issue a document calling for a halt to the creation of new companies providing
payday loans. The tightening this time could be regarded as increased
coordination between local and central financial regulators, as the National
Financial Work Conference and the 19th Communist Party Congress emphasized,
Huang wrote. Some local governments have issued too many licenses to payday loan
companies, and the central government has ordered them to review the companies
and strengthen supervision. (Financial News)
The issuance of corporate bonds decreased by around 60% in valuation in the
first 10 months of this year, although new bond categories experienced high
growth, the Securities Daily reported Friday. Through October, 1,074 corporate
bonds were issued, raising CNY1,070.73 billion, down 58.87% from a year ago,
Pengyuan Credit Rating data show. In the same period, 22 green corporate bonds
were issued, with a volume of CNY22.76 billion. The issuance of corporate bonds
of innovative companies rose quickly, totaling 16, worth CNY3.14 billion, the
newspaper said, without giving any base number or growth rate. The rapid growth
in green company and innovative company bonds could be attributed to the Chinese
government's encouraging development of green finance and small companies, and
vowing to expand financing channels for them. Shi Xiaoshan, an analyst at
Pengyuan, said that with risk controls continuing in the bond sector and a lack
of momentum in corporate bonds, yields would continue to diverge. (Securities
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