MNI China Daily Summary: Monday, October 14

     DATA: China's exports fell 3.2% y/y to $218.12 billion in September, the

steepest y/y drop in seven months and followed August's 1.0% y/y drop. Imports

plunged 8.5% y/y to $178.47 billion after 5.6% y/y fall in August, suggesting

lackluster domestic spending. Exports to the U.S. fell 21.9% y/y following 16.0%

drop in August, while imports were down 15.7%, easing from last month's 22.4%

y/y drop.

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

(OMOs), leaving liquidity unchanged as no reverse repos matured, according to

Wind Information. The total liquidity in the banking system is reasonable and

ample, the PBOC said.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) increased to 2.6523% from Saturday's close of 2.5100%, data

by Wind Information showed. The overnight repo average rose to 2.5602% from

Saturday's 2.2113%. 

     YUAN: The yuan strengthened to 7.0669 against the U.S. dollar from Friday's

close of 7.1000. The PBOC set the dollar-yuan central parity rate stronger at

7.0725, compared with 7.0727 on Friday.

     BONDS: The yield on 10-year China Government Bonds was last at 3.1600%,

down from Saturday's close of 3.1677%, according to Wind Information. 

     STOCKS: The Shanghai Composite Index rallied 1.15% to 3,007.88, fueled by

positive sentiment following positive outcome from the China-U.S. trade talks

concluded last week. Hong Kong's Hang Seng Index rose 0.81% to 26,521.85.

     FROM THE PRESS: China and the U.S. will likely be in talks to pave the way

for a signed trade deal, Global Times said in an editorial on Sunday. While not

all remaining differences could be resolved, they shouldn't be the ground for

further confrontation, the officially owned newspaper said, calling on the U.S.

to approach the talks with a "constructive attitude."

     China's September CPI is expected to remain unchanged from August's 2.8%

y/y gain, while the PPI could further decline by 1.2% y/y, China Securities

Journal reported. The CPI set for release on Tuesday may show pork-fueled price

gains gradually ease with the release of more pork reserves, leaving greater

room for policy manoeuvres, the newspaper said citing unnamed analysts.

     China will continue to use central bank bills as a major tool in promoting

supply-side structural reform, according to a research paper penned by the PBOC

monetary committee, published in the Financial News. Issuing central bank bills

in Hong Kong effectively promotes yuan internationalization and stabilizes

market expectations amid increased external headwinds, the committee said.

     Foreign investments in Chinese yuan bonds rose CNY70.67 billion in

September to CNY1.79 trillion, a 10th consecutive monthly gain and CNY45.42

billion more than the monthly gain recorded in August, the Securities Daily

reported citing data from China Central Depository & Clearing. More overseas

investments in Chinese bonds are expected, the newspaper said citing analysts it

didn't identify.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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