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China Repo Rates Decline: Wind

CHINA PRESS

EU Should not Risk Invest Agreement: China Daily

JGB TECHS

(M1) Bullish Focus

AUSSIE 10-YEAR TECHS

(M1) New Multi-Month Highs

     TOP NEWS: China's official purchasing managers' index for manufacturing,
jointly released by the China Federation of Logistics and Purchasing (CFLP) and
the National Bureau of Statistics (NBS), rose to 51.8 in November from 51.6 in
October. The November reading was the second highest this year after the 52.4
reading in September and matched the 51.8 reading in March. Sentiment rose more
than expected, with the MNI survey median forecast calling for an unchanged
result of 51.6. The November reading means that activity in the Chinese
manufacturing sector continued to rise, but at a faster pace than the month
before. It was the 16th consecutive month that the reading has been above 50,
the break-even mark.
     TOP NEWS: Chinese President Xi Jinping told U.S. President Donald Trump in
a phone conversation Wednesday night that China's "unswerving goal" is to
denuclearize the Korean Peninsula and preserve peace and stability in the
region, Xinhua News Agency reported Thursday. The call came after North Korea's
test launch this week of a ballistic missile that the United States military
said could reach anywhere on the U.S. mainland. The U.S. military said previous
North Korea tests proved its missiles could hit as far away as Alaska or Hawaii.
Trump responded to the latest test by saying the U.S. would impose "additional
major sanctions" on Pyongyang, without specifying what those sanctions would be.
He also said in a Twitter message that he had spoken with Xi about North Korea's
"provocative actions," adding that "This situation will be handled!"
     RATES: Money market rates rose. The seven-day repo average was last at
2.9316%, higher than Wednesday's average of 2.9267%. The overnight repo average
was at 2.8327%, higher than Wednesday's 2.6164%.
     LIQUIDITY: The People's Bank of China injected CNY150 billion in seven-day
reverse repos, CNY120 billion in 14-day reverse repos and CNY10 billion in
63-day reverse repos via open-market operations. This resulted in a net zero
injection/drain for the day, as a total of CNY280 billion in reverse repos
matured on Thursday. It was the fourth straight trading day of net zero
injection/drain.
     YUAN: The yuan fell against the U.S. dollar after the People's Bank of
China set a weaker daily fixing. The yuan was last at 6.6034 against the U.S.
unit, compared with the official closing price of 6.5988 on Wednesday. The PBOC
set the yuan central parity rate against the U.S. dollar at 6.6034 on Thursday,
slightly weaker than Wednesday's 6.6011. The PBOC has set the fixing weaker for
four consecutive trading days.
     BONDS: The yield on benchmark 10-year China government bonds was last at
3.9050%, up from the previous close of 3.9000%, according to Wind, a financial
data provider.
     STOCKS: Stocks were down, led lower by the property agency and insurance
sectors. The benchmark Shanghai Composite Index closed down 0.62% at 3,317.19.
Hong Kong's Hang Seng Index was 1.53% lower at 29,171.80.
     FROM THE PRESS: The government's deleveraging campaign has made progress
and leverage ratios continue to fall in the financial and non-financial sectors,
but reducing the debt of state-owned enterprises (SOEs) is still the top
priority of the deleveraging effort, the Financial News, a journal run by the
People's Bank of China, reported Thursday on its front page. Deleveraging of big
SOEs has increased the pressure to deal with financial institutions'
non-performing loans and could trigger debt payment risks, the report warned,
citing analysts. Debt-for-equity swaps should be emphasized, the report argued,
noting that as of the end of September, 77 companies, mainly big SOEs, had
signed a total of CNY1.3 trillion in debt-for-equity swaps agreements, the
report said. (Financial News)
     The establishment of new private-sector banks in China has almost stalled
because regulators have raised the bar for approval and the capacity of new
institutions to attract deposits is weak, the 21st Century Business Herald
reported Thursday. Since 2014, 17 private banks have been approved, but they
rely heavily on interbank transactions because their deposit products have
attracted few clients, the report said. Given the ongoing financial deleveraging
campaign, this reliance is not sustainable, it said. Authorities have raised the
registered capital requirement for new banks to CNY2 billion, and the frequent
resignation of high-ranking executives at the new institutions has also weighed
on the sector, the report noted. (21st Century Business Herald)
     Other countries should be cautious about the spillover effects from "Trump
Economics," although a solid performance by the U.S economy could be a strong
engine for global growth, the Economic Information Daily said in a front page
commentary on Thursday. If the U.S makes significant tax cuts, other economies
should consider following suit to retain their competitiveness, the commentary
argued. The combination of U.S. monetary policy normalization and a large tax
reduction would push up U.S. public debt, forcing many emerging economies to
worry about the stability of their currencies and the security of their foreign
reserves, the commentary warned. (Economic Information Daily)
     Infrastructure investment is expected to slow further due to the
government's deleveraging and risk-prevention campaign, so improving consumption
will be the focus of efforts to stabilize growth, the China Securities Journal
reported Thursday. The infrastructure investment growth rate will drop to 14%
next year, in particular because regulators are tightening controls on
public-private partnership projects initiated by local governments, the report
noted. But if investment in the property and manufacturing sectors plunges, the
government is likely to boost infrastructure investment via fiscal spending to
offset the downward pressure on the economy, the report argued. (China
Securities Journal)
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com
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