MNI China Daily Summary: Tuesday, February 6

     LIQUIDITY: The PBOC skipped its Open Market Operations (OMO) on Tuesday,

stating on its website that liquidity in the banking system is "relatively

high", which can absorb the effects of maturing reverse repos and cash

withdrawals. Today was the ninth day that the central bank has refrained from

conduction OMOs. There was a net drain of CNY80 billion today after same amount

of reverse repos mature. CFETS-ICAP's money-market sentiment index closed at 46

on Monday, up from 36 at Friday's close.

     RATES: Money market rates were mixed after PBOC drained a net of CNY80

billion via its open-market operations. The 7-day repo average was last at

2.7101%, down from Monday's average of 2.7192%, while the overnight repo average

was at 2.5310% compared with Monday's 2.5182%.

     YUAN: The yuan gained against the U.S. dollar though the People's Bank of

China set a weaker daily fixing. The yuan was last at 6.2836 against the U.S.

unit, rising 0.14% compared with the official closing price of 6.2927 yesterday.

The PBOC set the yuan central parity rate vs the dollar at 6.3072, weaker than

Monday's 6.3019. PBOC has set the fixing weaker for a second day.

     BONDS: The yield on benchmark 10-year China government bonds was last at

3.8850%, down from the previous close of 3.9200%, according to Wind.

     STOCKS: Stocks dropped in Shanghai, led lower by telecommunication

companies shares, with Huaxing Chuangye Communication Technology Stock Co. Ltd

seeing a big drop. The benchmark Shanghai Composite Index closed down 3.35% at

3,470.65. Hong Kong's Hang Seng Index was down 4.07% at 30,933.01.

     FROM THE PRESS: The yuan may gain further ground against the dollar given

China's strong economy and market sentiment in the currency's favor, China

Securities Journal said Tuesday, citing market participants. The euro may

strengthen on optimism about the bloc's economy and a possible tightening of

European monetary policies. That may further weaken the dollar, the Journal

said.

     China will formally publish regulations on wealth management businesses by

early March, China Business reported Tuesday, citing an anonymous source close

to regulators. Regulators insisted on strict rules resisting calls for less

strenuous oversight, the newspaper said.

     New loans issued by Chinese banks in January may have reached a record of

CNY2.8 trillion, compared with CNY2 trillion a year ago, 21st Century Business

Herald reported, citing estimates by market sources. Banks have more to lend

under tighter wealth management restrictions, the newspaper said, citing a

lender from an agricultural commercial bank in southern China. The additional

loans still failed to keep up with the increasing demand, the paper said.

     Many banks in China have stopped accepting loan applications for new

public-private-partnership (PPP) projects as authorities root out unqualified

projects that may undermine financial stability, the Economic Information Daily

reported, citing industry sources. The Daily highlighted a November circular,

known as Document 92, from the Ministry of Finance that called for scrapping

projects without proper preparation or those that failed to inject the agreed

capital, the Daily said. Some regional projects were halted awaiting assessment,

particularly if the local government has weak fiscal standing, daily said. 

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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