MNI China Daily Summary: Monday, November 26

     TOP NEWS: The National Development and Reform Commission (NDRC) said on

Monday that it will allow foreign banks and Sino-foreign joint venture banks in

China to borrow more via overseas financing. The NDRC will expand the overseas

financing quota in accordance with economic and financial needs, it announced on

its website Monday. Meanwhile, foreign banks will be required to use the funds

raised to support the real economy via investing in particular industries, as

part of broader efforts to promote industrial upgrading and supply-side

structural reform, the NDRC said.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

(OMOs) for a 22nd straight trading day on Monday, leaving liquidity unchanged,

as no reverse repos mature today, according to Wind Information. The central

bank said month-end fiscal expenditures, as well as other factors, will be

sufficient to offset maturing Treasury cash deposits at commercial banks.

     RATE: The 7-day weighted average interbank repo rate for depository

institutions (DR007) increased to 2.6401% from Friday's close of 2.5741%, Wind

Information showed. The overnight repo average increased to 2.4886% from

Friday's 2.3275%.

     YUAN: The yuan appreciated to 6.9360 against the U.S. dollar from Friday's

close of 6.9421. The PBOC set the dollar/yuan central parity rate at 6.9453

Monday, weaker than Friday's 6.9306 fix.

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.4100%, up from the closing price of 3.3900% on Friday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 0.14% lower at

2,575.81. Hong Kong's Hang Seng Index increased 1.73% to 26,376.18.

     FROM THE PRESS: The PBOC has skipped open market operations for a record

long 22 trading days, perhaps because maturing repos ensured adequate liquidity

provision, the China Securities Journal said on Monday, citing Liu Yu, an

analyst at Guosheng Securities. The central bank's October balance sheet

suggests that the PBOC had in fact conducted repurchase operations, or repos,

during the month to withdraw excess liquidity, the Journal noted, citing Liu.

The revival of repo operations does not indicate a tightening of monetary

policy. Indeed, in the current environment, further RRR cuts and even outright

interest rate cuts are possible, although any such measures are likely to be

carried out in a directional manner, e.g. targeted RRR cuts or asymmetric rate

cuts, the Journal said. (Link to the story: https://bit.ly/2DY093E)

     If the U.S. Fed raises rates a further 3 or 4 times in the year ahead, the

PBOC may not have the leeway to follow suit, the China Securities Journal

reported Monday, citing Huang Yiping, an economist and former member of the

central bank's monetary policy committee. Therefore, the government should

consider further measures to maximise the independence and flexibility of

monetary policy, the report said. Firstly, the authorities should allow the yuan

to fluctuate more flexibly. Secondly, the management of cross-border capital

flows should be strengthened, the Journal said, citing Huang. (Link to the

story: https://bit.ly/2FIxrFr)

     The tightening U.S./China one-year govvie spread is not surprising, and is

unlikely to lead to yuan depreciation or large capital outflows, the Economic

Daily reported Monday, citing Ming Ming, chief fixed income analyst at CITIC

Securities and a former PBOC monetary policy official. China's capital markets

have not yet been fully opened, while its FX derivatives market needs improving.

These two factors will impede the narrowing yield spread from putting pressure

on the yuan, Ming said. China's economy remains resilient, having been helped by

efforts to reduce overcapacity and destock, as well as the deleveraging

campaign. As such, the tightening spread should not lead to large capital

outflows, Ming added. (Link to the story: https://bit.ly/2Rcijl2)

     The China Banking and Insurance Regulatory Commission (CBIRC) has given

German insurance giant Allianz SE a green light to set up a subsidiary operation

in China. The new group will be China's first insurance holding company to be

wholly-owned by a foreign insurer, the Financial News reported. The CBIRC has

also recently granted ten further market access approvals to foreign banks and

insurance companies, the newspaper said. The CBIRC said Sunday that it will soon

take additional measures to further promote the opening up of China's financial

sector and to improve risk prevention and supervision capacities.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]