MNI China Daily Summary: Tuesday, February 14

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY91 billion of operations via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net drain of CNY302 billion after offsetting the maturity of CNY393 billion reverse repos today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9637% from the close of 1.8994% on Monday, Wind Information showed. The overnight repo average was up to 1.5580% from the previous 1.4085%.

YUAN: The currency strengthened to 6.8165 against the U.S. dollar from the previous close of 6.8271. The PBOC set the dollar-yuan central parity rate lower at 6.8136, compared with 6.8151 set on Monday.

BONDS: The yield on the 10-year China Government Bond was last at 2.9075%, up from the close of 2.9050% on Monday, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.28% to 3,293.28, while the CSI300 index was up 0.04% to 4,145.29. Hong Kong's Hang Seng Index was down 0.24% to 21,113.76.

FROM THE PRESS: Advanced approval for special bonds in 2023 by the Ministry of Finance has exceeded CNY2 trillion for the first time, as the government looks to promote investment and expand domestic demand, according to Yicai.com. Analysing the 2023 draft budget report, the news outlet noted advanced special bond approvals stood at CNY2.19 trillion, an increase of 50% over the previous year. This will allow local governments to issue bonds as soon as possible, with most funds to be used in H1 2023, and go towards building industrial parks, transportation and other infrastructure projects. It is expected the scale of special bonds this year will exceed the CNY3.65 trillion recorded in 2022 but will be constrained by debt risk issues, the paper said.

CITIC Bank Nanning will offer mortgages to buyers who’s age plus duration of the mortgage does not exceed 80 years, however the maximum age limit of 70 years will still apply, according to China Securities News. The paper said the new policy will allow for longer loan periods, and tap into the housing buying demand of people aged 40 to 59 with relatively strong repayment ability and adequate credit rating. However, buyers and banks should be cautious in extending mortgage durations, and carefully assess the ability of the buyer to repay later in life, the paper said.

The PBOC is expected to increase the quota of its Medium-term Lending Facility in February as it looks to ensure a stable economic rebound, according to China Securities News. The expectation a higher MLF quota is strong, but PBOC policy will be influenced by factors such the demand for physical credit, the speed of cash circulation, the rebalancing of deposits between institutions, and the effects of peak tax season in February. The decline in market interest rates in recent days is mainly due to the central bank's increase in open market operations to meet institutional liquidity needs and stabilise market expectations, the paper said.