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EXCLUSIVE: The People's Bank of China (PBOC) will act further to support
the economy and stabilise market sentiment as Beijing battles coronavirus,
policy advisors told MNI, but one noted that supply constraints as a result of
the disruption caused by the disease could put pressure on consumer prices and
limit the potential for monetary easing. The central bank is likely to continue
providing liquidity to ease pressure on companies forced to suspend operations,
said Sheng Songcheng, former head of the PBOC statistics and analysis
department, noting there was still room for targetted cuts to both lending rates
and reserve requirements.
EXCLUSIVE: The PBOC has made contingency plans for a steep yuan sell-off
caused by the coronavirus, but there is no sign so far that it will need to be
enacted, policy advisors told MNI. USDCNY surged pass 7 to the dollar for first
time since Dec. 27 on Monday was expected and allowed the onshore yuan to track
losses in the offshore CNH, which had continued to trade during the week-long
Chinese New Year holiday, Guan Tao, former Director General of Balance of
Payments at the State Administration of Foreign Exchange, told MNI. The
authorities have plans to deal with extreme market conditions, but there is no
need to activate them now, Guan said.
EXCLUSIVE: China is likely to expand fiscal stimulus, boosting its budget
deficit to 3% of gross domestic product or higher to support the economy amid
the coronavirus outbreak, two government advisors told MNI, calling for the
government to provide assistance to affected companies. Even before the virus
outbreak, Liu Xiangdong, deputy director of economic research at the China
Center for International Economic Exchanges, had expected the deficit target to
be set at around 3% of GDP this year, up from 2.8% in 2019, as the authorities
aim for growth of around 6%. But the target may need to be widened further, he
LIQUIDITY: The PBOC injected CNY380 billion via 7-day reverse repos as well
as CNY120 billion via 14-day reverse repos. This resulted in a net injection of
CNY400 billion given the maturity of CNY100 billion today, according to Wind
Information. The operations aim to maintain reasonable and ample liquidity in
the banking system during special periods of epidemic prevention and control,
RATES: The seven-day weighted average interbank repo rate for depository
institutions (DR007) fell to 2.4094% from 2.6003% on Monday, Wind Information
showed. The overnight repo average decreased to 2.2243% from 2.4892% on Monday.
YUAN: The yuan strengthened to 6.9900 against the dollar from 7.0257 on
Monday. PBOC set the dollar-yuan central parity rate higher at 6.9779, compared
with Monday's 6.9249. Today's fixing is the highest since the start of the year
and is biggest daily move since Jul 20, 2018.
BONDS: The yield on 10-year China Government Bonds was last at 2.8700%, up
from the close of 2.8375% on Monday, according to Wind Information.
BONDS: China Development Bank will issue as much as CNY8 billion one-year
special bonds on Feb. 14 for the prevention and control of the coronavirus
epidemic, it said in a statement.
STOCKS: The Shanghai Composite Index rallied 1.34% to 2,783.29. Hong Kong's
Hang Seng Index gained 1.21% to 26,675.98.
FROM THE PRESS: Chinese local governments must help facilitate enterprises
resume production, Xinhua News Agency reported following a meeting of the
politburo's standing committee. Authorities should increase financial support,
initiate new investment projects and actively promote projects under
construction, Xinhua said.
Total social financing and new yuan loans are expected to grow
substantially this year if the Loan Prime Rate (LPR) is cut this month, the
China Securities Journal reported citing Wang Qing, chief macroeconomic analyst
with Golden Credit Ratings. A lower LPR will reduce rates on loans, boost
corporate borrowing demand and mitigate the impact of the coronavirus epidemic
in the short term, the newspaper cited Wang as saying.
Several Chinese banks say they will cut lending rates for small and
medium-sized enterprises (SMEs) severely affected by the coronavirus epidemic,
while taking other credit support measures to reduce their funding pressure, the
China Securities Journal reported. Bohan Bank will lower lending interest rates
by 0.5 percentage point for SMEs in Hubei province, while CITIC Bank's Wuhan
branch will also cut 0.5 pp from the interest rate for SME and personal business
loans, the newspaper said.
China's State Taxation Administration will implement preferential tax
policies for medical care deliverers and is actively studying other tax support
policies, according to a statement on the its website.
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