MNI China Daily Summary: Tuesday, December 24
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY64.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY291.3 billion after offsetting the maturity of CNY355.4 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.4940% from 1.5395%, Wind Information showed. The overnight repo average rose to 1.3427% from 1.3134%.
YUAN: The currency strengthened to 7.2987 against the dollar from the previous 7.2988. The PBOC set the dollar-yuan central parity rate higher at 7.1876, compared with 7.1870 set on Monday. The fixing was estimated at 7.2993 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.7200%, up from the close of 1.6750% previously, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index was up 1.26% to 3,393.53, while the CSI300 index rose 1.27% to 3,983.69. The Hang Seng Index increased 1.08% at 20,098.29.
FROM THE PRESS: China’s 10-year treasury yield will likely decline further to 1.65% or even 1.6%, as investors continue to bet on a bond rally amid expectations for reserve requirement ratio and interest rate cuts, Yicai.com reported citing analysts. Ming Ming, chief economist of CITIC Securities said the next rate cut may be 20-25 bps, while the recent downward trend in treasury yields has clearly exceeded this level, noting the risk of an excessive bond rally in the short term.
Foreign investors have reduced their holdings of yuan bonds, as room for arbitrage via swap transactions narrowed as U.S. treasury yields soar, Yicai.com reported. By end-November, foreign investors held a total CNY4.15 trillion of bonds in China interbank markets, falling from the previous month’s CNY4.25 trillion, the newspaper said. Foreign holdings have fallen every month since hitting an all-time high of CNY4.52 trillion in August and now account for 2.7% of China's interbank bond market, said Yicai.
China has urged the U.S. to immediately stop its 'wrong practices', as Beijing will take all necessary measures to defend its rights and interests, a spokesman for the Ministry of Commerce said after the U.S. launched a new probe into the Chinese semiconductor industry. It’s self-contradictory for the U.S. to accuse China of so-called "non-market practices", as the U.S. provides huge subsidies to its chip industry, and American companies account for nearly half of the global chip market, the spokesman said, according to a statement on the MOFCOM website.