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LIQUIDITY: The People's Bank of China (PBOC) injected CNY113 billion via 7-day reverse repos and CNY62 billion via 14-day reverse repos with the rates unchanged at 2.00% and 2.15%, respectively. The operations have led to a net injection of CNY173 billion after offsetting the maturity of CNY2 billion reverse repos today, according to Wind Information. The operation aims to keep liquidity stable at quarter-end, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.6931% from the close of 1.8179% on Monday, Wind Information showed. The overnight repo average fell to 1.3842% from the previous 1.4221%.
YUAN: The currency weakened to 7.1580 against the U.S. dollar from the previous close of 7.1464. The PBOC set the dollar-yuan central parity rate higher for an eighth trading day at 7.0722, compared with 7.0298 set on Monday, marking the weakest fixing since June 30, 2020.
BONDS: The yield on the 10-year China Government Bond was last at 2.7175%, down from Monday's close of 2.7225%, according to Wind Information.
STOCKS: The Shanghai Composite Index rallied 1.40% to 3,093.86, while the CSI300 index gained 1.45% to 3,892.30. Hong Kong's Hang Seng Index edged up 0.03% to 17,860.31.
FROM THE PRESS: The PBOC has initially funded and established the basic framework for a Financial Stability Guarantee Fund, which will be used for the disposal of major financial risks, according to an article by the PBOC’s Financial Stability Bureau published on its social media account. The PBOC continues to work on resolving risks at key enterprises and financial institutions. It said China's financial risks have become more controlled after three years of focus on urgent risks, the article said. By the end of 2021, 98.9% of the banking industry's total assets were rated within the Bank's safety boundary.
The yuan may continue to weaken over the rest of 2022 as U.S. yields may peak on expectations the Federal Reserve could end its rate hikes in H1 2023, Yicai.com reported citing AVIC Trust macro strategy director Wu Zhaoyin. The People’s Bank of China has ample tools to stabilize the yuan, including activating the counter-cyclical factor, adjusting the foreign exchange deposit reserve ratio and tightening liquidity in the offshore yuan markets the newspaper said. The PBOC’s raising of the foreign exchange risk reserve ratio on forward FX sales by 20% will add an additional cost of about 700 points, which is intended to curb FX purchases, the newspaper said.
Chinese housing developers face increasing default risks amid declining home sales and a tightening financing environment, the Securities Times reported. It noted real estate bond defaults and rollovers reached CNY134 billion across 30 issuers as of Sep 19. Of the 194 A-share and Hong Kong-listed developers, 141 reported a year-on-year decline in net profit, the Times said citing their semi-annual reports. There are 19 developers, including Evergrande and Sunac, that delayed releasing their reports. Developers are busy expanding sales, disposing assets, and discussing debt extensions with creditors to avoid cross-default clauses and introducing state-owned developers as strategic investors, the newspaper said.
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