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Yuan Faces Stronger Depreciation in H2: News

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     TOP NEWS: Spending by consumers during the week-long Chinese New Year
holidays cooled from a year ago, according to a report by investment bank CICC
published Monday. Retail and restaurant sales grew 8.5% y/y, while tourism
spending rose 8%, compared with 10.2% and 13% last year. Box office sales
reached CNY5.06 billion for the first six days of the holiday, rising 2.7% y/y.
Sales of cars, housing and land over the holiday also slowed from last year.
     DATA: FX reserves increased by $15.2 billion to $3.09 trillion in January,
up from $3.07 trillion in December, higher for the third consecutive month. The
value of China's FX reserves was bolstered by exchange rate conversions and
asset price fluctuations, mainly caused by the depreciation of U.S. dollar,
according to the SAFE.
     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations
today, resulting in a net drain of CNY20 billion as that amount of reverse repos
matured, according to Wind Information. The PBOC said the total liquidity of the
banking system is currently at a relatively high level, which can offset
financial institutions' payment of reserve requirements and other factors.
     RATE: The 7-day weighted average interbank repo rate for depository
institutions (DR007) increased to 2.5147% from the close of 2.3215% on Feb 1,
Wind data showed. The overnight repo average increased to 2.2425% from 2.0118%
earlier.
     Yuan: The yuan depreciated to 6.7804 against the U.S. dollar from the close
of 6.7391 on Feb 1. The PBOC set the dollar-yuan central parity rate at 6.7495
today, up from the 6.7081 set on Feb 1. 
     STOCKS: The benchmark Shanghai Composite Index rose 1.36% to 2,653.90. Hong
Kong's Hang Seng Index rose 0.71% to 28,143.84.
     BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.08%, up 0.06 bps from the close of 3.02% on Feb 1, according to brokers.
     FROM THE PRESS: With China's economy still facing headwinds, conservative
estimates suggest China's GDP growth this year will fall to about 6.3%, with Q1
growth maybe as low as 6%, the Economic Information Daily said in a front-page
op-ed today. So far, a total 22 out of 30 provinces have set a lower growth
target this year, lower by an average of 0.4 percentage points, and more than 10
have set the target rate at around 6%, the Daily said.
     The sales at retail and catering enterprises nationwide totalled around
CNY1.005 trillion over the Chinese New Year break, a rise of 8.5% from the same
period last year, China News Service reported, citing data released by the
Ministry of Commerce on Sunday. The sales of Chinese green food, smart home
appliances, new digital products and local specialty products showed rapid
growth during the holiday, the Ministry said.
     A total CNY1.0635 trillion on money market ops mature in the week following
the Chinese New Year holiday, including CNY402.5 billion of MLFs, China
Securities Journal reported, citing data from Wind. Analysts think total
liquidity will remain ample and the central bank's OMOs will be steady,
considering the size of funds likely to flow back to the system after the
holiday, the newspaper said.
--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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