MNI China Daily Summary: Thursday, November 4

LIQUIDITY: The People's Bank of China (PBOC) injected CNY50 billion via 7-day reverse repos with the rates unchanged at 2.2%. The operation led to a net drain of CNY150 billion after offsetting the maturity of CNY200 billion reverse 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) decreased to 2.1129% from 2.1163% on Wednesday, Wind Information showed. The overnight repo average fell to 1.8881% from the previous 1.9851%.

YUAN: The currency strengthened to 6.3956 against the dollar from 6.3970 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.3943, compared with the 6.4079 set on Wednesday.

BONDS: The yield on 10-year China Government Bond was last at 2.9550%, down from Wednesday's close of 2.9650%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.81% to 3,526.87, while the CSI300 index increased 0.99% to 4,868.74. Hang Seng Index gained 0.80% to 25,225.19.

FROM THE PRESS: The PBOC intended to keep the market from worrying about tightening liquidity when it on Wednesday ramped up the size of the 7-day repo purchases by CNY40 billion from a day ago to CNY50 billion, the Shanghai Securities Journal reported. Concerns for liquidity shortage were based on the incoming maturities of CNY1 trillion MLF and another CNY1 trillion reverse repos, the newspaper said. The central bank will use MLF and open market operations to offset the short-term liquidity gap, the newspaper cited analysts as saying. Increasing fiscal expansion towards year-end will also release CNY1.89 trillion and CNY3.81 trillion in November and December, which can fully absorb the remaining CNY1.79 trillion of government bonds to be issued, the Journal said citing Shen Xinfeng, the chief analyst at Northeast Securities.

Local governments in China are lowering the thresholds of land auctions by reducing margin ratios and dividing into smaller parcels, a turnaround from the crackdown against the industry seen earlier this year, the 21st Century Business Herald reported. However, many developers remain too cash-strapped to participate, the newspaper said. In a recent land auction in Wuxi city, developers were required to pay only 50% of the total land transfer fees by year-end, but their cash flow remained tight, the newspaper said citing the China Index Academy. The top 21 Chines cities sold only 52% of their planned land offering this year, the newspaper said. MNI noted that land sale revenues accounted for about 30% of local governments' fiscal incomes.

China is not signaling the public that an imminent war on Taiwan is about to start, when the commerce ministry urged local authorities to ensure supply and stable prices of daily necessities, Hu Xijin, the editor-in-chief of government-run Global Times, wrote in a column. The situation across the Taiwan Straits has not escalated to "urgency," and the public may have overinterpreted the ministry's statement, wrote Hu, who comments on a host of issues in the tabloid-sized newspaper owned by the People's Daily, the Communist Party's official mouthpiece. The commerce ministry also encouraged families to store daily necessities, which Hu said is not an indication that they are in shortage. MNI noted that shares of food producers surged by the daily limit on Wednesday as some consumers reportedly began hoarding food and other staples after the ministry's statement on Monday.