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POLICY: The Chinese yuan rallied on the outbreak of new Covid-19 variant Omicron with shares little changes though the global outbreak is being closely watched as a challenge to economic recovery.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY100 billion via 7-day reverse repos with the rates unchanged at 2.2%. The operation has led to a net drain of CNY20 billion after offsetting the maturity of CNY50 billion reverse repos and CNY70 billion of Treasury's cash deposits at commercial banks today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 2.2474% from 2.2600% on Friday, Wind Information showed. The overnight repo average increased to 1.8615% from the previous 1.6941%.
YUAN: The currency strengthened to 6.3821 against the dollar from 6.3913 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.3872, compared with 6.3936 set on Friday.
BONDS: The yield on 10-year China Government Bond was last at 2.8800%, up from Friday's close of 2.8700%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.04% to 3,562.70 while the CSI300 index lost 0.18% to 4,851.42. Hang Seng Index fell 0.95% to 23,852.24.
FROM THE PRESS: The People's Bank of China should continue to implement prudent monetary policies with sufficient liquidity and structural monetary tools while monitoring the impact of possible monetary tightening in Europe and the U.S., Yicai.com reported citing Wang Xin, the director-general of PBOC's Research Bureau. The central bank can also create favorable liquidity for special bond issuance aiming to replenish banks' capital, Wang was cited as saying. The PBOC can better promote social investment in low-carbon transformation and green industries to create more job opportunities and vigorously develop green financial products such as green municipal bonds, Wang was cited as saying by the newspaper.
China should adopt more proactive macroeconomic policies to deal with the challenges as the Omicron threatens global recovery, said the Securities Times in a commentary. China's monetary and fiscal policies this year are relatively restrained, leaving enough policy space for next year, the newspaper said. China should adhere to strict epidemic control measures to ensure a more positive economic outlook next year and avoid interrupting the economic development plan, the newspaper said. New drivers of economic growth will continue to emerge with major projects of new energy and high-tech infrastructure in the country's 14th Five-Year Plan kicking off, the newspaper added.
China can make more use of its advantages having effective epidemic control and large policy space to maintain the momentum of growth even as the U.S. tilts toward a tighter monetary policy, wrote Guan Tao, the chief global economist of BOC International and a former forex regulatory official in a commentary on Yicai.com. The central bank should further increase the flexibility of the yuan, as freer two-way movement helps absorb internal and external shocks and balance the market, said Guan. China should also continue to prudently promote the two-way opening of its financial sector and guide companies to better manage currency exchange risks and foreign debt repayment, Guan added.