Free Trial

MNI China Daily Summary: Monday, January 29

MNI (London)
     TOP NEWS: China's switch to pursuing high-quality growth away from the
previous emphasis on grow rates doesn't mean local governments should let their
economies idle, the People's Daily said in a commentary.
 - Recent economic data released by some local governments showed a rapid drop
in GDP growths, indicating flaws in industry structures: Daily
 - Quality of growth needs to be considered together with optimized rate of
growth, and the quality and structure of the economy: Daily
 - New drivers and industries should be supported: Daily.
 ***TAKEAWAY: A relatively high GDP growth is still one of China's goals. The
government may still give specific GDP targets at the National People's Congress
in March.
     TOP NEWS: China's currency surged to the highest level in almost 18 months
on a trade-weighted basis against those 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 0.47% last week from a week ago to 95.70, the highest
since June 17, 2016, when the trade-weighted index stood at 95.82.
 ***COMMENT: The RMB index has risen 0.90% so far this year, compared with a
0.02% appreciation through the whole of 2017. Some in the market believe that
the RMB's surge may prompt the PBOC to intervene if it touches 96, since the
immediate impact may slow China's exports.
     LIQUIDITY: The PBOC skipped its Open Market Operations (OMO) on Monday,
stating that the orderly use of Contingent Reserve Allowances (CRA) and fiscal
expenditure can absorb the effects of maturing reverse repos and cash
withdrawals.
 - Net drain of CNY140 billion today after same amount of reverse repos mature 
 - A total of CNY760 billion in reverse repos will mature this week
     RATES: Interbank market rates diverged after PBOC drained a net CNY140
billion via skipping open-market operations.
 - 7-day repo average last at 2.9001%, lower than 2.9194% yesterday
 - Overnight repo average 2.5570%, up from 2.5089% yesterday.
 ***COMMENT: The PBOC returned to its "neutral and tight" bias after unexpected
largess in the past two weeks. Today was the third trading day that the central
bank skipped its OMOs, which has drained CNY530 billion. There is a rumour,
unconfirmed, that the PBOC asked the big banks to stop lending overnight capital
to non-banking institutions via "window guidance" on Friday.
     YUAN: The Chinese yuan fell slightly to 6.3237 against the U.S. dollar from
Friday's 6.3227 closing.
 - The PBOC set the yuan central parity rate vs the U.S. dollar at 6.3267 on
Monday, stronger than last Friday's 6.3436. PBOC has set the fixing stronger for
seven consecutive trading days. 
 - Today's fixing marks the highest since Nov 2, 2015.
***COMMENT: China International Capital Corporation (CICC) raised 2018 year-end
USD/CNY forecast to 6.18 from 6.28 on Monday, on the back of its downward
adjustment of 2018 USD index forecast. CICC expects some of the ad-hoc capital
control measures to be lifted, especially those concerning individual FX usage.
     BONDS: Yield on 10-year China government bonds last traded 3.9400%, up from
3.9350% close Friday: Wind Information
     STOCK: The Shanghai Composite Index closed down 0.99% to 3,523.00, while
the Hang Seng Index in Hong Kong fell 0.29% to 33,059.00.
     FROM THE PRESS: U.S. President Donald Trump offered nothing new in his
speech at the World Economic Forum in Davos, maintaining an America-centric
rhetoric, the China Daily commented on Sunday evening.
 - Trump's speech "had little to do with the core concern of the Davos
gathering" which aims to bring countries together for world development;
instead, he promoted his own achievements and tried to attract foreign
investment: Daily
 - Trump is hoping others will "make the U.S. great again"; free trade is never
to his taste: Daily.
 - Trump's protectionist policies will further divide the world, Daily said.
     China should strictly prohibit credit illegally flowing into the property
sector, and deny loans to unqualified developers, Financial News said. 
- Banks shall not help fan speculation and worsen the property bubble: News. 
- China stressed on Friday that regulators should curb household debt, prohibit
illegal credit from going into property market: CBRC 
- Gov't needs to crack down on loans disguised as consumer purchases but in fact
were intended for home purchases: Financial News 
***TAKEAWAY: Banks will continue to curb credit available to property sector.
Developers will face difficulty in obtaining financing, further slowing
investment.
     The banking sector will continue to be strictly monitored, CBRC said
Saturday following a two-day meeting.
 - CBRC emphasized risk control and maintaining financial stability;
 - To clamp down on regulatory officials derelict in their duties, and to hold
them accountable.
--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$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

To read the full story

Close

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.