MNI China Daily Summary: Tuesday, April 2

     PBOC: China's central bank requested the police to investigate rumors

circulated last Friday about cutting banks' reserve requirement ratios, the

Financial News, a People's Bank of China publication, said on its Weibo, a

Twitter-like social media service. Pretending to be the official Xinhua News

Agency, the alleged party falsely stated that the PBOC would cut RRR on April 1,

a misdemeanor that might have broken the law, the newspaper said.

     PBOC: The PBOC should hold the decision to cut reserve requirement ratio

until the first-quarter economic data is known as well as considering the

liquidity condition and interest rates, the Economic Information Daily said

today citing Sheng Songcheng, a former advisor to the central bank, who

responded to speculation that RRRs may be cut this month. Cutting RRRs when the

economy is still stabilizing may risk inflation and cause excess liquidity to

speculate on real estate, the newspaper said citing Sheng. China is scheduled to

release Q1 data on April 17, according to the National Bureau of Statistics.

     LIQUIDITY: The PBOC skipped open market operations for the 10th trading

day, leaving liquidity unchanged as no reverse repos matured, according to Wind

Information. Total liquidity in the banking system is at a relatively high

level, according to the PBOC.

     RATE: The 7-day weighted average interbank repo rate for depository

institutions (DR007) decreased to 2.1000% from Monday's close of 2.4980%,

according to Wind Information. The overnight repo average fell to 1.9000% from

2.3053% on Monday.

     YUAN: The yuan weakened to 6.7213 against the U.S. dollar from Monday's

close of 6.7107. The PBOC set the dollar-yuan central parity rate at 6.7161

today, compared with 6.7193 on Monday.

     STOCKS: The benchmark Shanghai Composite Index rose 0.20% to 3,176.82. Hong

Kong's Hang Seng Index increased 0.21% to 29,624.79.

     BONDS: The yield on the 10-year China Government Bond was last at 3.165%,

up 3.5 bps from Monday's close, according to brokers. 

     FROM THE PRESS: The yuan is likely to strengthen to as high as 6.6 against

the U.S. dollar from about 6.7 now as trade relations with the U.S. improve,

said Ming Ming, the chief analyst at CITIC Securities in a report. A halt in the

reverse U.S. bond yield curve, often seen as a recession signal, coupled with

strong consumer confidence and positive new housing sales data showed a U.S.

recession is less likely for now, further reducing external pressure, Ming said.

A stronger yuan also tend to boost China's stock market, he said. 

     Sales of second-hand housing last month in Beijing reached the highest

since May 2018 at 16,051 units, leading the recovery of housing markets in

first- and second-tier cities, the Securities Daily said today citing data by

research firm 58 Anjuke Institute. The sharp rise in transaction was driven by

speculation that the loan policy for second homes could be further tightened, as

well as more mortgage loan approvals, said the newspaper citing Zhang Bo, chief

analyst at 58 Anjuke Institute. Suppressed demand and speculation also fueled

the market, the daily reported citing Zhang Dawei, chief analyst at Centaline

Property.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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