MNI China Daily Summary: Thursday, February 22

     TOP NEWS: The PBOC injected CNY160 billion in 7-day reverse repos, CNY130

billion in 28-day reverse repos, and CNY60 billion in 63-day reverse repos on

Thursday. Today was the first time the central bank conducted OMOs after 16

consecutive trading days of inaction. It resulted in a net injection of CNY350

billion as no reverse repo matures today. CNY243.5 billion medium-term lending

facilities (MLF) will mature today, postponed by the PBOC from the original

maturity date on Feb 15. CFETS-ICAP's money-market sentiment index has not yet

been published today. It closed at 35 on Feb 14, the last trading day before the

Spring Festival.

     RATES: Money market rates were mixed after PBOC injected a net of CNY350

billion via its open-market operations. The 7-day repo average was last at

2.8875%, up from the average of 2.8279% on Feb 14. The overnight repo average

was at 2.6106% compared with the 2.7173% average rate on Feb 14.

     YUAN: The yuan weakened against the U.S. dollar after the People's Bank of

China set a weaker daily fixing. The yuan was last at 6.3531 against the U.S.

unit, dipping 0.13% compared with the official closing price of 6.3441 on the

previous trading day. The PBOC set the yuan central parity rate vs the US dollar

at 6.3530 on Thursday, weaker than the 6.3428 parity on Feb 14.

     BONDS: The yield on benchmark 10-year China government bonds was last at

3.8950%, according to Wind.

     STOCKS: Stocks rose in Shanghai, led by ceramics companies shares, with

Guangdong Dowstone Tech leading the gains. The benchmark Shanghai Composite

Index closed up 2.17% at 3,268.56. Hong Kong's Hang Seng Index was down 1.13%

lower at 31,076.78.

     FROM THE PRESS: Offshore yuan CNH dropped 0.56% during the Spring Festival

after some fluctuations during the period, Securities Daily reported Thursday.

The fluctuations put an end to the appreciation seen over the past two weeks,

and shows market expectations have diverged. Less foreign exchange settlements

and an increased need for foreign currencies for Chinese outbound tourism have

both contributed to the dip as well. The US dollar is stabilising and trending

stronger, restraining further gains in the yuan. The PBOC's Monetary Policy

Report for the fourth quarter stressed the need to deepen reform of the yuan

exchange rate formation schedule. It noted that continuing the reform would

increase the market's role in deciding the yuan exchange rate, and government

intervention would decrease, the paper said.

     Lower-tiered cities in China saw an increase in house sales promotions,

which were aimed at attracting city-based workers visiting families in less

developed cities during the Spring Festival, reported China Securities Journal

on Thursday. Sales in some promotional property projects are robust, having sold

more than 200 houses in less than a month right before the Spring Festival in

Xi'an. Housing purchase restrictions for talents continued to loosen in Tier 2

cities, but research institutions and property companies do not pay enough

attention to this buyer group - thus the real demand for home purchases has not

actually changed, the CSJ said.

     Financial institutions are following tighter regulations on wealth

management products this Chinese New Year, although they continue to compete

fiercely for more WMP businesses, the Shanghai Securities News reported

Thursday. Illegal WMPs such as P2P products cannot be found in retail banks, and

yields of WMPs do not exceed 6%. Banks also obey new rules prohibiting them from

guaranteeing investors to receive principal or a certain yield. During Chinese

New Year, WMPs are sold out quickly, partly because banks increase yields in

order to get money before the Spring Festival.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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