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Free AccessMNI China Daily Summary: Monday, February 12
TOP NEWS: China's currency surged to the highest level in almost 18 months
on a trade-weighted basis against the currencies of its major trading partners,
according to weekly data released Monday by the People's Bank of China. The
CFETS Weekly RMB Index, which measures the yuan relative to a basket of 24
currencies, gained 0.66% last week from a week ago to 96.92 - the highest level
since June 3, 2016, when the trade-weighted index stood at 97.
LIQUIDITY: The PBOC skipped its Open Market Operations (OMO) Monday,
stating on its website that the liquidity in the banking system is at a
"moderate" level after absorbing the impact of cash withdrawals. Today was the
14th consecutive trading day that the central bank has refrained from conducting
OMO. Liquidity conditions remain unchanged as no reverse repo matures today. No
reverse repos will mature this week. The benchmark 7-day deposit repo average
fell to 2.8125% today from 2.8456% on Sunday (Feb 4 working day ahead holidays):
Wind Information.
RATES: Interbank market rates diverged after PBOC skipped open-market
operations, which resulted in unchanged liquidity conditions. The 7-day repo
average was last at 2.8679%, higher than 2.8456% Friday. The overnight repo
average 2.5629%, down from 2.5988% yesterday.
YUAN: The Chinese yuan strengthened to 6.2998 against the U.S. dollar from
Friday's 6.3004 closing, following today's stronger fixing. PBOC set the yuan
central parity rate vs the U.S. dollar at 6.3001 on Monday, stronger than
Friday's 6.3194.
BONDS: Yield on 10-year China government bonds last traded 3.8700%, up from
3.8850% close Friday.
STOCK: The Shanghai Composite Index closed up 0.78% to 3154.13, while Hong
Kong's Hang Seng Index was last at 29,700.38, up 0.65%.
FROM THE PRESS: China's foreign exchange agency (SAFE) will lift some
restrictions on Qualified Foreign Institutional Investors (QFII) and provide
hedge tools to qualified institutions in a bid to facilitate capital flows, said
Guo Song, director-general of SAFE's capital account management department, over
the weekend in China Forex, a journal run by SAFE. The country will clarify the
forex management relevant to Panda bonds and further improve the convertibility
of capital accounts, Guo noted.
The People's Bank of China should further coordinate macro-prudent
regulations and controls on operations of market players to stem frequent
financial issues, wrote Xu Zhong, director of the PBOC Research Bureau, in an
article published on the Finance 40 Forum website on Sunday. The regulatory
arbitrage, messy off-balance-sheet transactions and illegal fund-raising in
recent years indicate the contradiction between separated financial supervision
and mixed operations, Xu said.
The authorities should stabilize market expectations when the ongoing
deleveraging campaign goes deeper and more complicated, Economic Information
Daily reported on their front page on Monday. Corporate deleveraging needs a
benign environment considering firms in debt rely heavily on funding and
relevant guarantees, the report argued. Negative market expectations could
trigger panic in market players and heighten volatility, the report warned.
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.