MNI China Daily Summary: Thursday, November 17

EXCLUSIVE: Chinese property developers are at risk of defaulting on higher cost U.S. dollar bonds despite Beijing’s rescue package that includes easier funding to support the ailing property market, with debt restructuring plans needed to minimise losses for creditors, advisers told MNI.

POLICY: China’s Ministry of Commerce will support the consensus reached by President Xi Jinping and U.S. President Joe Biden during their meeting in Bali this week, with both sides agreeing to communicate and coordinate on economic and trade issues, said spokeswoman Shu Jueting at a briefing, without disclosing further details.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY132 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net injection of CNY123 billion after offsetting the maturity of CNY9 billion reverse repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8630% from 2.0150% on Wednesday, Wind Information showed. The overnight repo average decreased to 1.6653% from the previous 1.9386%.

YUAN: The currency weakened to 7.1291 against the dollar from 7.0809 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 7.0655, compared with 7.0363 set on Wednesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8050%, down from Wednesday's close of 2.8200%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.15% to 3,115.43, while the CSI300 index fell 0.41% to 3,818.66. The Hang Seng Index lost 1.15% to 18,045.66.

FROM THE PRESS: The PBOC will increase the intensity of prudent monetary policy instead of issuing excessive currency, strengthen cross-cycle adjustment to balance short-term and long-term needs, economic growth and price stability, as well as the internal and external environment, according to the Q3 Monetary Policy Report published on its website. The PBOC will monitor the potential for rising inflation, especially changes on the demand side, and continue to consolidate the favorable conditions for increasing domestic grain production and smooth operation of the energy market, and make appropriate responses to keep the price level basically stable, the statement said. It will also adhere to the market's decisive role in the formation of the exchange rate, strengthen expectations management, and maintain the basic stability of the yuan at a reasonable and balanced level, the statement said.

There has been a large net inflow of northbound funds for several consecutive days, with foreign investment banks including Goldman Sachs and JPMorgan Chase suggesting clients increase their allocation to Chinese assets, China Securities Journal reported. The net inflow on November 14 was CNY16.6 billion, a new high for a single-day net inflow this year, the newspaper said. Foreign institutions believe the recent decline in A-share market presents a buying opportunity, and A-shares are more resilient against the headwinds of global economy, the newspaper said. The valuations of major A-shares indexes have dropped to historical low levels, with the price-earning ratio of the Shanghai Composite Index standing at 12.25 on Nov 16, the newspaper said.

The prices of new and second-hand houses in first-, second- and third-tier cities all suffered a month-on-month decline in October, the first comprehensive decline in the past eight years, Caixin reported. For new homes, prices in first-, second- and third-tier cities fell by 0.1%, 0.3% and 0.4% m/m, respectively. For second-hand housing, the falls were 0.3%, 0.5% and 0.5% m/m, respectively. Market expectations may improve as the recent supportive financing policies for property developers kick in, and demand may be revived as local governments lower the home purchase threshold and costs, Caixin said citing analysts.