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EGB/Gilt - Attention turns to the FOMC

EMERGING MARKETS

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Range in Underlying Spurring Vol Sales

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Extends gains against the Pound and EUR

     TOP NEWS: China's Communist Party Politburo convened to discuss the
economic planning next year, Xinhua News Agency reported. The meeting, presided
by the party chief Xi Jinping, who is also the president, calls for China to
promote high-quality development of manufacturing capabilities, deeply integrate
the advanced manufacturing with modern services, develop a strong domestic
market, accelerate restructuring and expand opening, Xinhua said. China should
adhere to the general policy tone of making progress on stability, further
promoting high-quality development, and deepening supply-side reform, Xinhua
said.
     DATA: Foreign direct investment (FDI) into China in November fell on an
annual basis for the first time this year, plunging 27.6% to USD13.6 billion,
data by the Ministry of Commerce showed. That compared with 7.3% y/y gain to
USD9.7 billion in October. The ministry attributed the sharp drop to a high base
of comparison. FDI totaled US$121.26 billion in the first 11 months, marking a
1.1% y/y, compared with 6.5% in Jan-Oct.
     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations
(OMOs) for a 35th straight trading day, leaving liquidity unchanged. No reverse
repos mature today, according to Wind Information. The central bank said the
level of liquidity in the banking system is at a reasonable and ample level,
which can offset the issuance of government bonds and other factors.
     RATE: The 7-day weighted average interbank repo average rate for depository
institutions (DR007) increased to 2.5959% from Wednesday's close of 2.5471%,
Wind Information showed. The overnight repo average increased to 2.5140% from
Wednesday's 2.4070%.
     YUAN: The yuan appreciated to 6.8690 against the U.S. dollar from
Wednesday's close of 6.8893. The PBOC set the dollar/yuan central parity rate at
6.8769, lower than Wednesday's 6.9064.
     BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.3650%, up from the closing price of 3.2750% on Wednesday, according to Wind
Information.
     STOCKS: The benchmark Shanghai Composite Index closed 1.23% higher at
2,634.05. Hong Kong's Hang Seng Index decreased 1.29% to 26,524.35.
     FROM THE PRESS: The National Development and Reform Commission (NDRC)
doesn't support real estate developers selling bonds to finance commercial
projects, the China Economic Herald, a newspaper run by the NDRC, reported to
clarify a misinterpretation of government policies. The NDRC said yesterday that
it will give priority to companies applying to issue bonds with good credit
standing and stable operations that play a leading role in industrial
restructuring, the newspaper said. The NDRC will only support bond financing for
housing projects in areas limited to urban renewal, affordable housings and
rental housings, the newspaper said. 
***Comment: The NDRC was careful not to stoke another property bubble. Some in
the market earlier interpreted the policy as a greenlight for commercial
developers to increase working capital and accelerate project development.
     China will lower the tax burden for partners in venture capital firms, the
State Council said as a measure to boost innovation. Partners' equity transfer
and dividend yield from one VC fund will be subjected to personal income tax at
a tax rate of 20%, Xinhua News Agency reported late Wednesday. Partners of VC
firms can also choose to pay their personal income tax based on the overall
annual income of the firm, using progressive rates ranging from 5% to 35%, the
report said. The new policy will be effective from 2019 and will run for five
years, the report said.
     Manufacturing investment growth will likely slow in the year ahead, albeit
moderately, as structural reforms will continue to bite and the private-sector
financing difficulties remain, the Securities Daily said in a front-page
commentary. The buoyant growth of manufacturing investment this year has mainly
been driven by high-tech manufacturing, including computers and communication
devices, with double digit growth for nine consecutive months, indicating that
China's industrial capacity has been upgraded somewhat, the newspaper said.
--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$$$]