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Needle Still Points South


Resistance Remains Intact


Reverse Repo Operation


Softer Greenback Extends GBP Bounce

     TOP NEWS: Establishing a more open, transparent, secure and efficient bond
market is part of China's effort to promote financial reform, Pan Gongsheng,
deputy director of the People's Bank of China(PBOC) said on Thursday at a forum
in Beijing. China is planning to launch index products like bond ETF, fully open
repo transactions, and vigorously promote the development of yuan derivatives
market, according to Pan. The State Administration of Foreign Exchange will also
make it easier for foreign investors to conduct currency hedging transactions.
     TRADE WAR: China's Vice Premier Liu He will pay a visit to the U.S. for
trade negotiations on Jan 30-31, Gao Feng, the spokesman of the Ministry of
Commerce, said in a presser today.
     LIQUIDITY: The PBOC today injected CNY250 billion via 7-day reverse repos,
and CNY150 billion through 28-day reverse repos, adding liquidity for a fourth
consecutive day. The net is an injection of CNY380 billion given the maturity of
CNY20 billion reverse repos, according to Wind Information. The PBOC said China
is currently in the tax season and the liquidity in the banking system is
falling rapidly.
     RATE: The 7-day weighted average interbank repo average rate for depository
institutions (DR007) decreased to 2.5361% from Wednesday's close of 2.6137%,
Wind Information showed. The overnight repo average decreased to 2.2509% from
Wednesday's 2.2832%.
     YUAN: The yuan depreciated to 6.7675 against the U.S. dollar from
Wednesday's close of 6.7550. The PBOC set the yuan's central parity rate
stronger against the dollar at 6.7592 today, compared with 6.7615 Wednesday.
     BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.0825%, down from Wednesday's closing 3.0900%, according to Wind Information.
     STOCKS: The benchmark Shanghai Composite Index closed 0.42% lower at
2,559.64. Hong Kong's Hang Seng Index decreased 0.56% to 26,752.49.
     FROM THE PRESS: The depreciation of the yuan does not necessarily lead to
capital outflow. Though the yuan was under great depreciation pressure last
year, China actually had a net inflow of capital, said IFENG News today citing
Guan Tao, former director of the Balance of Payments Department under SAFE. Guan
also mentioned that the current appreciation of the yuan is likely short-term
driven by a weak dollar and the Fed's dovish signal in interest rate hike, IFENG
News said.
     China must boost domestic demand and consumption to cope with the economic
downward pressure, Premier Li Keqiang told a symposium in Beijing, according to
a statement on the government' website late Wednesday. It is also necessary to
boost effective investment in public services and infrastructure, including
information infrastructure, Li added.
     China won't become another America, nor will it replace the U.S., the
People's Daily said today citing Foreign Minister Wang Yi. It is a serious
strategic misjudgment for some people in the U.S. to suspect that the rise of
China will lead to a hegemony which will challenge or replace the U.S., Wang
added. Wang also said the two countries have the will to expand economic and
trade cooperation. They should have the ability and wisdom to push for a
mutually acceptable solution.
     Relevant government departments are preparing to draft documents to promote
the high-quality development of National Economic and Technological Development
Zones (NETDZ), which will be given more reform autonomy, the Economic
Information Daily reported. NETDZs are undergoing industrial upgrades with
addition of high-end manufacturing and other modern industries, the daily said.
--MNI Beijing Bureau; +86 10 8532 5998; email:
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]