MNI China Daily Summary: Thursday, February 23

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY300 billion of operations via 7-day reverse repos, with the rates unchanged at 2.00%. The operation led to a net drain of CNY187 billion after offsetting the maturity of CNY487 billion reverse repos today, according to Wind Information. The operation aims to keep banking system liquidity stable towards the end of month, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.1758% from 2.1761%, Wind Information showed. The overnight repo average decreased to 1.4291% from the previous 1.7398%.

YUAN: The currency strengthened to 6.8918 against the dollar from 6.8953 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 6.9028, compared with 6.8759 set on Wednesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.9175%, down from Wednesday's close of 2.9200%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.11% to 3,287.48, while the CSI300 index fell 0.08% to 4,103.65. The Hang Seng Index was down 0.35% to 20,351.35.

FROM THE PRESS: New rules on private equity investment in the real estate industry will expand the use of high quality investment including REITs, according to analysts interviewed by Yicai.com. New rules announced recently by the China Securities Regulatory Commission (CSRC) and Asset Management Association of China (AMAC) seek to normalise the role of private equity and attract top level fund managers into the sector to promote long-term stable investment. Starting with pilot schemes first, the new rules take into consideration large capital volumes, long term cycles, and large geographical differences, the news outlet said.

Chinese mortgages need more flexibility by allowing market mechanisms to determine interest rates, which would help overcome recent problems with prepayments, according to Liu Xiaochun, Vice President of Shanghai New Finance Research Institute. Writing in Yicai.com, he explained regulation of the industry should not directly limit the interest rate, and parties should be allowed to re-negotiate terms of the mortgage according to the market situation at the time. Any blanket move to lower the interest rate of existing housing loans would bring risks to the banking industry, but by allowing a market orientated approach, the sector can abandon its the "one-size-fits-all" approach.

The flow of people and logistics since the Spring Festival has rebounded rapidly, indicating the rebound in domestic demand is gathering pace, according Shanghai Securities News. The average number of express delivery collections was up 20% m/m, according to data released by the State Council. For real estate, the average daily transactions of second-hand houses in 50 cities in the first two weeks of February increased by about 90% compared with the same period in January, according to a leading housing agency. The first week of the month showed operating rates of blast furnaces and rebar mills rose by 17.1% percentage points respectively from the previous week, according to an industry report.