MNI China Daily Summary: Friday, November 30

     POLICY: China should keep the current stringent regulations on the housing

market, even if it comes at the cost of sacrificing some short-term economic

growth, a former official at the People's Bank of China(PBOC) said in an emailed

note Friday. If the current regulations are maintained, the real estate industry

would likely contribute less to the GDP growth, also lowering local governments'

land sales revenue, said Sheng Songcheng, now an advisor to the Shanghai

municipal government. (See full story: https://www.marketnews.com/node/1840985)

     DATA: Manufacturing PMI fell to 50.0% in November, the breakeven mark

between contraction and expansion, missing the median forecast of 50.1%

projected by an MNI survey, data released by the National Bureau of Statistics

showed on Friday. The outcome was below October's 50.2 and the lowest since

49.9% in July 2016. The deceleration suggested that manufacturing activities are

facing increasing downward pressure.

     LIQUIDITY: The PBOC skipped open market operations (OMOs) for a 26th

straight trading day Friday, leaving liquidity unchanged as no reverse repos

mature, according to Wind Information. The central bank said month-end fiscal

expenditure has further expanded, with total liquidity in the banking system at

a relatively high level.

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

institutions (DR007) increased to 2.6778% from Thursday's close of 2.6449%, Wind

Information showed. The overnight repo average increased to 2.6286% from

Thursday's 2.2379%.

     YUAN: The yuan appreciated against the dollar Friday, as USDCNY decreased

to 6.9440 against Thursday's close of 6.9451. The PBOC earlier set the

dollar/yuan central parity rate at 6.9357 Friday, higher than Thursday's 6.9353.

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.3750%, up from the closing price of 3.3600% on Thursday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 2.49% higher at

2,588.19. Hong Kong's Hang Seng Index rose 0.21% to 26,506.75.

     FROM THE PRESS: Market expectations for the PBOC to cut interest rates have

increased following dovish comments from Fed chief Powell, 21st Century Business

Herald reported Friday. The PBOC may not lower the deposit and loan benchmark

interest rate, but probably adjust the open market operations(OMOs) rate, the

newspaper reported, citing Shen Jianguang, chief economist at JD Finance. The

PBOC could trigger a rate cut early next year, or, if it takes the Spring

Festival and Two Sessions into consideration, perhaps it's more rational to see

a cut by the end of Q1 or the beginning of Q2. (Link to the story:

https://bit.ly/2zwf7tK)

     The PBOC is unlikely to conduct large-scale reverse repos in the near

future, extending a 26-day long suspension of OMOs, the Securities Daily

reported Friday, citing Wang Qing, chief macroeconomic analyst at Dongfang

Jincheng, a credit rating agency. The PBOC has skipped OMOs for the whole of

November, as it aims to send the market a signal that liquidity will only be

loosened to a certain degree, the Daily said citing Wang. Entering December,

liquidity will pick up as local governments strive to promote infrastructure

projects, adding to fiscal expenditure and new special government bonds, the

newspaper said citing Wang. (Link to the story: https://0x9.me/NqlHz)

     Most local governments should be able to meet the annual growth target and

help hit the overall 6.5% growth for this year, the Economic Information Daily

said Friday. Currently, local governments are actively pushing infrastructure

projects, which aim to lay the foundation for next year's economic growth, said

the Daily, citing Zhang Jun, chief economist at Morgan Stanley. An issue for

2019 is to prevent a rebound in local government debt and the leverage ratio, to

avoid blind investments in infrastructure, and to focus on improving the

investment efficiency, said the paper, citing Zhang. (Link to the story:

https://0x9.me/oDYTP)

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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