MNI China Daily Summary: Thursday, November 26

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY80 billion via 7-day reverse repos with rates unchanged at 2.2%. This resulted in a net injection of CNY10 billion given the maturity of CNY70 billion repos today, according to Wind Information. The operation aims to maintain the liquidity in the banking system at a reasonable and ample level, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.3444% from close of 2.3329% on Wednesday, Wind Information showed. The overnight repo average decrease to 1.2596% from the previous 1.5648%.

YUAN: The currency strengthened to 6.5729 against the dollar from 6.5796 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 6.5780, compared with the 6.5749 set on Wednesday.

BONDS: The yield on 10-year China Government Bond was last at 3.3050%, up from Wednesday's 3.2850%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.22% to 3,369.73, while the CSI300 index increased by 0.18% to 4,919.59. Hang Seng Index gained 0.56% to 26,819.45.

FROM THE PRESS: The incoming Biden Administration should revamp the previous White House approach on Asia Pacific affairs and seek a more constructive path of co-operation through organisations such as APEC instead of a focus on military confrontation and intelligence targeting China, the Global Times said in an editorial on Wednesday. Biden's team should address hostilities in the region and begin strategic communications with China to seek compromises, the newspaper said. China has no intention of pitting the two countries against each other but instead will conform to realities in the region, the newspaper said.

The PBOC is unlikely to raise policy interest rates in the short term as it eases gradually as the economy continues to recover, the China Securities Journal reported citing analysts. The need to raise OMO rates is not strong as growth hasn't returned to its full potential and the yuan has been appreciating, the newspaper said citing Li Yishuang, analyst at Cinda Securities. The central bank may first withdraw preferential policies such as deferred repayments on maturing loans, and liquidity conditions have returned to normal with little room for further tightening, the newspaper said citing Zhou Guannan, analyst at Huachuang Securities.

The negative impact of the rapid appreciation of the yuan on small exporters may become apparent in Q4, as most exporters haven't hedged their exposures to foreign exchange risks, the China Securities News reported citing analysts. Small exporters struggle to afford bank fees given their thin profit margins, the newspaper said citing Yuan Tao, analyst at Orient Futures. China should offer more domestic forex derivatives and promote their usage, the newspaper said citing Zhang Jing, a researcher at CITIC Futures.