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Needle Still Points South


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Bull Rally Accelerates


Economists Survey Raises 2021 CPI Forecast To 4.9%

     TOP NEWS: The People's Bank of China announced on its website Monday
morning that it had injected CNY120 billion in liquidity via seven-day reverse
repos, CNY110 billion via 14-day reverse repos and CNY70 billion via 28-day
reverse repos. The central bank raised its rate for 14-day reverse repos by five
basis points, from 2.60% to 2.65%, on Monday, following the rate hike for
seven-day and 28-day reverse repos last Thursday, from 2.45% and 2.75% to 2.50%
and 2.80%, respectively. The PBOC said the operation aims to hedge the impact of
tax payments, government bonds issuance payments, maturing Medium-term Lending
Facility (MLF) loans and maturing reverse repos, and to keep liquidity
conditions stable overall.
     DATA: New home prices in China rose in more cities in November than the
month before as tightening policies in some cities eased. According to data
released Monday by the National Bureau of Statistics, 50 cities out of the 70
cities the NBS monitors saw new home prices rise on a month-on-month basis, up
from the 44 that saw rises in October. Prices dipped in 10 cities, down from 14
in October, while the other 10 experienced no change. Yan Yuejin, the director
of E-House Real Estate Research Institute, said the rise was due to eased
housing price controls, as well as a rebound in sales in some cities. Some of
the housing controls have included increased waiting times before property units
can be resold, restricting non-residents and people without jobs in certain
cities from purchasing homes, and increasing mortgage rates.
     LIQUIDITY: The People's Bank of China injected CNY120 billion in seven-day
reverse repos, CNY110 billion in 14-day reverse repos and CNY70 billion in
28-day reverse repos via open-market operations Monday. This resulted in a net
injection of CNY260 billion for the day, as a total of CNY40 billion in reverse
repos matured on Monday. A total of CNY350 billion in reverse repos will mature
this week.
     RATES: Money market rates were mixed. The seven-day repo average was last
at 2.9124%, compared with Friday's average of 2.9185%. The overnight repo
average was at 2.7109%, compared with Friday's 2.6939%.
     YUAN: The yuan weakened against the U.S. dollar after the People's Bank of
China set the fixing rate weaker for the day. The yuan was last at 6.6123
against the U.S. unit after opening at 6.6126, compared with the official
closing price of 6.6084 on Friday. The PBOC set the yuan central parity rate at
6.6162, weaker than Friday's 6.6113. 
     BONDS: The yield on benchmark 10-year China government bonds was last at
3.8900%, compared with the previous close of 3.8850%.
     STOCKS: Stocks were up, led higher by the coal mining sector. The benchmark
Shanghai Composite Index closed up 0.05% at 3,267.92. Hong Kong's Hang Seng
Index was 0.94% higher at 29,120.13.
     FROM THE PRESS: Though the U.S. Federal Reserve raised its benchmark
interest rate a quarter-point to 1.5% last week, China's monetary policy will
not blindly follow the step, the official People's Daily said Saturday. The
expectation for an interest rate hike by central banks in some countries,
including Canada, Britain and South Korea, has been priced in by the market, so
the impact of the American move is weakening, according to analysts. China will
stick to its independent and steady style of monetary policy adjustment, the
newspaper said. The manager of the open-market operations office at the People's
Bank of China said the recent decision to raise interest rates slightly was
based on market demand. It was a normal reaction to the Fed hike, the manager
added, and could help control the leverage ratio of the macro-economy. Analysts
said the capital market and the real economy relied unreasonably on monetary
policy makers. China will continue to stick to risk controls and let the
financial market better serve the real economy, the newspaper said. (People's
     A combination of risk controls and making the process more convenient is
necessary for the healthy development of Chinese companies' outbound investment,
the official People's Daily said Monday. China has been clamping down on
unreasonable outbound investment since earlier this year to prevent financial
risks to the domestic market and the inefficient use of capital. The major goal
is to examine whether outbound investment endangers national security and
interests, said Zhang Huanteng, head of the foreign capital and overseas
investment department at the National Development and Reform Commission.
Investments in foreign property, hotels, cinemas, entertainment and sports clubs
form a "restricted development" category that is closely examined. Other
categories face less regulation to ease outbound investment. New policies on
outbound investment have delayed companies' capital allocation for overseas
projects, the newspaper said, citing unidentified people. Zhang said a law
should be created to both regulate outbound investment and ensure investors'
interests, rather than the current situation, where regulators issue specific
departmental rules. (People's Daily)
     President Trump of the United States is set to "accuse China of 'economic
aggression'" in his national security strategy announcement scheduled for
Monday, the Financial Times reported, as Trump becomes increasingly "frustrated
at his inability to use his bond with China's President Xi Jinping to convince
Beijing to address his trade concerns."
     China's monetary policy will continue to be "prudent and neutral" even
though the U.S. Federal Reserve raised its benchmark interest rate, the Economic
Information Daily, a newspaper under the official Xinhua News Agency, said in a
front-page commentary Monday. The Fed hike will theoretically strengthen the
dollar and lead to depreciation of the yuan, and also cause capital to flow to
the United States. But because the market has fully absorbed the expectations of
the hike, it will have limited impact on the domestic financial market, the
commentary said. The People's Bank of China has raised rates slightly for
open-market operations, but the central bank does not intend to follow the Fed
in raising the benchmark interest rate. The PBOC wants to guide market
expectations and enforce deleveraging, the commentary said. Although China's
economy has been resilient, downward pressures should not be ignored, as the
property sector increasingly cools down and investment growth may slow further,
it said. Money market rates are still rising, and yields of 10-year treasury
bills exceed 4%. These conditions show that now may not be a good time for China
to raise its benchmark interest rate, the newspaper argued. (Economic
Information Daily)
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
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