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Omicron Worry Dominates

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(Z1) Shallow Bounce

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Late Rate Rally, Risk-Off as Omicron Comes to US

LIQUIDITY: The People's Bank of China (PBOC) injected CNY100 billion via 7-day reverse repos with the rates unchanged at 2.2%. The operation has led to a net injection of CNY50 billion after offsetting the maturity of CNY50 billion 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) increased to 2.2461% from 2.2374% on Wednesday, Wind Information showed. The overnight repo average rose to 1.8253% from the previous 1.7798%.

YUAN: The currency weakened to 6.3894 against the dollar from 6.3877 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 6.3980, compared with 6.3903 set on Wednesday.

BONDS: The yield on 10-year China Government Bond was last at 2.9025%, flat from Wednesday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.24% to 3,584.18, while the CSI300 index decreased 0.41% to 4,896.44. Hang Seng Index gained 0.22% to 24,740.16.

FROM THE PRESS: China should accelerate the issuance of this year's remaining local government special bonds and set up the issuance quote and distribution plan for next year appropriately, according to a Xinhua News Agency's statement following a Wednesday meeting chaired by Premier Li Keqiang. Local governments should promote the construction of well planned projects and strive to have the projects materialized early next year, the meeting said. The central government prohibits the misuse of funds on building renewals and leaving the funds unused, the meeting said.

The PBOC is likely to boost liquidity through the end of the year by more reverse repurchases and increased medium-term lending facilities, the Economic Information Daily said citing analyst Wang Qing of Golden Credit Rating, who commented following the central bank's CNY50 billion net injection on Wednesday. The PBOC may also cut lenders' reserve requirement ratios by the end of the year should it want to release dovish pro-growth signals, further promote the rebound of credit and social financing and reduce the economy's costs of financing, said the newspaper owned by Xinhua News Agency.

China may set a GDP growth target next year at 5.5%, a rate that was achieved in Q2 and the highlight of 2021, with 5% being the floor, Ming Ming, the deputy director at Citic Securities research institute, wrote in the 21st Century Business Herald. Investment will be a key measure next year as the government pursues loose credit, stabilizing leverage and stabilizing growth, with the pace of growth in infrastructure and manufacturing investment likely to accelerate and prioritized, Ming said. While 5% is likely the pace registered this year, the top leadership has expressed a more pro-growth wish, so policy makers likely want to arrest the current downward slide, said Ming. China's exports may slow next year while consumption has limited room to expand, said Ming.

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