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POLICY: China’s embattled property market faces a policy dilemma as buyers shrug off lower mortgage rates and relaxed home purchase limits amid a slide in confidence triggered by mortgage boycotts and financially distressed developers, potentially delaying a rebound analysts warn.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY2 billion via 7-day reverse repos and CNY21 billion via 14-day reverse repos with the rates unchanged at 2.00% and 2.15%, respectively. The operations have led to a net injection of CNY21 billion after offsetting the maturity of CNY2 billion reverse repos today, according to Wind Information. The operation aims to keep liquidity stable at quarter-end, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.5554% from 1.5962% on Thursday, Wind Information showed. The overnight repo average rose to 1.4567% from the previous 1.4560%.
YUAN: The currency weakened to 7.1104 against the dollar from 7.0810 on Thursday. The PBOC set the dollar-yuan central parity rate higher for a sixth trading day at 6.9920, compared with 6.9798 set on Thursday.
BONDS: The yield on 10-year China Government Bond was last at 2.6925%, up from Thursday's close of 2.6730%, according to Wind Information.
STOCKS: The Shanghai Composite Index fell 0.66% to 3,088.37 while the CSI300 index edged down 0.34% to 3,856.02. The Hang Seng Index lost 1.18% to 17,933.27.
FROM THE PRESS: There is no reason for a sharp depreciation of the yuan against the U.S. dollar following this week's Federal Reserve rate hike, the 21st Century Business Herald reported. The yuan’s mid-September breach of 7 was driven by expectations the Fed would hike 75bps and a sharp drop in China’s August export growth, a combination unlikely to repeat this year, the newspaper said citing Minsheng Securities analyst Zhou Junzhi. The strong dollar will exert greater pressure on non-dollar currencies other than the yuan as China and the U.S. are in different economic cycles, the newspaper said citing Zhou Maohua, analyst with China Everbright Bank. The domestic economy is recovering steadily with moderate inflation, sufficient policy room and a stable balance of payments, he added.
Local governments are required to effectively implement pro-growth policies and stabilize the economy, according to a statement on the government's website following the State Council executive meeting chaired by Premier Li Keqiang. China will strengthen policy support to the transportation and logistics sectors via a 10% reduction in toll roads for trucks and a 20% cut in cargo port charges in Q4, the statement said. The smooth operation of ports, cargo terminals and main roads should be ensured and excessive Covid curbs should be avoided, the statement said.
The impact of the Federal Reserve’s tightening on China’s A-share market is expected to be relatively limited, the China Securities Journal reported citing analysts. A-shares offer attractive valuations and will be supported by a steady economic recovery in Q4, easing monetary policies and ample liquidity, the newspaper said citing Chen Li, chief economist of Chuancai Securities. After recent declines in A-shares, valuations are hovering near historically low levels and a rebound is viewed as likely over the medium and long term, the newspaper said citing analysts.
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