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TOP NEWS: The People's Bank of China (PBOC) cut the cash reserve ratio requirement for banks on Monday by 50 basis points, releasing CNY1.2 trillion long-term funds into the banking system to boost the economy, support SMEs, and lower funding costs. The cut will be implemented on Dec. 15, according to a statement on the central bank's website.

POLICY: Chinese financial regulators emphasized risk to the broader property sector could be contained with the Evergrande crisis being an individual, short-term case, after the country’s most-indebted developer warned of possible cross-defaults on dollar bonds.

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rates unchanged at 2.2% on Monday. The operation has led to a net drain of CNY90 billion after offsetting the maturity of CNY100 billion repos 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) rose to 2.0888% from 2.0470% on Friday, Wind Information showed. The overnight repo average decreased to 1.8155% from the previous 1.8993%.

YUAN: The currency weakened to 6.3715 against the dollar from 6.3690 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.3702, compared with 6.3738 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.8800%, down from Friday's close of 2.9200%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.50% to 3,589.31 while the CSI300 index lost 0.17% to 4,892.62. Hang Seng Index fell 1.76% to 23,349.38.

FROM THE PRESS: The PBOC may cut banks’ reserve requirement ratios as early as mid-December to promote credit expansion and better support the economy, China Securities Journal reported following Premier Li Keqiang’s speech on Friday calling for an RRR cut in due course. About CNY950 billion medium-term lending facilities are maturing on Dec. 15, which may be the window for RRR cut, the newspaper said citing analysts. The cut is likely to be 50-bps to roll over part of the maturing MLF, so to help reduce banks’ debt cost and avoid excessive liquidity, the newspaper said citing Wang Yifeng, chief banking analyst of China Everbright Securities.

China’s real estate market may become more stable with market sentiment normalizing as the impact of the Evergrande risks become clearer, and developers will enjoy smoother financing channels amid policy correction, the PBOC-run newspaper Financial News reported citing analysts. Some Chinese developers have begun to repurchase overseas bonds, and some investors have also begun to buy dollar bonds issued by Chinese developers as domestic home sales, land purchases and financing of developers normalize, according to a statement on the PBOC’s website Friday responding to possible Evergrande defaults on its dollar bonds. Loans to developers continue to rise in November based on the sharp rebound in October, and domestic real estate bond issuance also rose 84% from the previous month, the newspaper said, noting that the pessimism on real estate has been relieved as financing policy eased.

China’s securities regulator said it is open to companies choosing to be listed in the U.S. and a few companies are actively working with regulators for U.S. listings. Reports that the Chinese authorities are forbidding those so-called variable interest entities (VIE) seeking U.S. listings are untrue, the China Securities Regulatory Commission said in a statement on Sunday. The reports came after a new U.S. SEC law forced some Chinese companies to delist from the U.S. These practices are by some U.S. political forces and shouldn’t be a responsible policy choice, said the Chinese watchdog.

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