MNI China Daily Summary: Monday, October 8

     TOP NEWS: The People's Bank of China (PBOC) lowered the reserve requirement

ratio (RRR) for commercial banks and rural cooperatives by 1 percentage point

(100 bps) from Oct. 15, injecting net CNY750 billion after retiring some lending

instruments. The cut is still defined as a "targeted adjustment" as CNY450

billion will be used to repay the PBOC's medium-term lending facility (MLF)

maturing on Oct. 15.

     LIQUIDITY: The PBOC skipped open market operations on Monday, resulting in

a net drain of CNY100 billion in liquidity as the same amount of reverse repos

matured today, according to Wind Information. The central bank said liquidity in

the banking system is at a relatively high level to absorb the impacts of

reverse repo maturities and reserve requirement ratio pressure on financial

institutions. It was the fourth straight trading day the PBOC has skipped OMOs.

CFETS-ICAP's money-market sentiment index closed at 51 on Sept 30, the last

trading day, up from 44 on September 29. The benchmark 7-day deposit repo

average dropped to 2.6445% on Monday from 2.7975% on September 30.

     MONEY MARKET RATES: The 7-day repo average dropped to 2.6342% from 2.7975%

Sunday. The overnight repo average decreased to 2.5213% from Sunday's 2.7195%.

     YUAN: The yuan depreciated to 6.9036 against the U.S. dollar from Sunday's

closing of 6.8814. The PBOC set the yuan central parity rate weaker for a fifth

straight trading day at 6.8957, compared with 6.8792 on Sunday.

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

3.6150%, up from the closing 3.6100% on Sunday, according to Wind Information,

     STOCKS: The benchmark Shanghai Composite Index closed 3.72% lower at

2716.51. Hong Kong's Hang Seng Index decreased 1.3% to 26235.38. The A-share

market suffered from the sharp fall, despite the central bank's RRR cut. The

slump came as investors caught up with foreign market moves after the week-long

National Day Holiday.

     FROM THE PRESS: Expectations for the depreciation of the yuan have

weakened, said Liu Shijin, a member of the Monetary Policy Committee at the

PBOC. China's strong fundamentals should keep the currency stable and at a

reasonable and balanced level, Liu noted.

     China will boost domestic by implementing a more active fiscal policy,

China's Finance Minister Liu Kun said. The government will cut tax for

companies, use fiscal revenue to support important infrastructure projects,

facilitate consumption, and improve people's livelihoods, Liu said. The Ministry

of Finance has also decided to aid companies facing problems during the trade

war with the U.S., by allowing affected some employees to transfer to other jobs

or to receive training, Liu said.

     Growth in tourism revenue during the mid-autumn festival holiday and the

National Day holiday slowed to a ten-year low. Some 726 million people travelled

domestically during the two holidays, up 9.4% y/y, compared with growth of 12.0%

in 2017 and 12.8% in 2016, according to analysts, citing data from the Ministry

of Cultural and Tourism. Domestic travel revenue grew 9.0% y/y to CNY599.08

billion, compared to 14.0% and 14.4% gains in 2017 and 2016 respectively, the

analysts said. While overseas travel data was not provided, outbound tourism

from Shanghai and Beijing customs -- which comprises half of China's outbound

travel -- dropped, the analysts said. The falls were due to a bottleneck in

tourism facilities, as well as the fact that the mid-autumn festival and

National Day holidays this year were separated by a six-day gap. It possibly

also reflected slowing consumption during an economic slowdown.

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

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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