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TOPS NEWS: Chinese President Xi Jinping spoke to his U.S. counterpart
Donald Trump on Tuesday, China Central Television reported.
- Two sides maintained stable relations with important achievements in 2017,
should begin second-round dialogues and "fully utilize" the four high-level
exchange mechanisms: Xi
- Countries should maintain positive development and momentum in DPRK issues,
and create conditions for renewing dialogues and negotiations: Xi
- China-U.S. should pursue constructive approach resolving trade and economic
- Trump was quoted saying the U.S. is willing to boost high-level exchanges,
deepen cooperation in "practical fields," properly handle bilateral economic and
trade issues, and further develop relations.
DATA: The expiration of some forward contracts held by PBOC caused the
central bank's December forex purchase position to decline for the first time in
- FX purchase position held by PBOC fell by CNY36.319 billion from November to
CNY21.48 trillion in December
- There was a gain of CNY2.37 billion in November
- PBOC's FX purchase position now at lowest level since February 2011. - Total
FX reserves increased $20.67 billion in December.
***TRADER COMMENT: "It is somehow surprising, since we didn't observe huge
demand for dollar purchase by businesses; PBOC has used forward contracts to
lessen yuan depreciation in the past," said Shanghai-based forex trader at a
LIQUIDITY: PBOC injected CNY160 billion in 7-day reverse repo, CNY150
billion in 14-day reverse repo, CNY10 billion in 63-day reverse repo in Open
Market Operation (OMO) on Tuesday, according to Wind Information.
- Net CNY270 billion injection after CNY50 billion reverse repos mature
- CFETS-ICAP money-market sentiment index ended at 52 on Monday, same as
- PBOC to officially announce OMO around 9:45a.m. local time - Benchmark 7-day
repo average last at 2.6866% vs 2.8644% on Monday.
RATES: Money market rates were mixed after PBOC injected a net of CNY270
billion via its open-market operations.
- 7-day repo average was last at 2.8831%, up from Monday's average of 2.8644%.
- The overnight repo average was at 2.7760% compared with Monday's 2.8021%.
YUAN: The yuan gained against the U.S. dollar after the People's Bank of
China set a stronger daily fixing.
- The yuan was last at 6.4382 against the U.S. unit, rising 0.05% compared with
the official closing price of 6.4417 yesterday
- PBOC set yuan central parity rate vs U.S. dollar at 6.4372 on Tuesday,
stronger than 6.4574 set yesterday
- Today's fixing is the strongest since Dec. 11, 2015.
BONDS: The yield on benchmark 10-year China government bonds was last at
3.9550%, down from the previous close of 3.9600%, according to Wind.
STOCKS: Stocks rose in Shanghai, led by property shares, with Greenland
Holdings led the gain. The benchmark Shanghai Composite Index closed up 0.77% at
3,436.59. Hong Kong's Hang Seng Index was down 1.32% higher at 31,752.10.
FROM THE PRESS: China will maintain financial deleveraging and purchase
curbs for the property market to help promote quality growth and control
financial risks, said Economic Information Daily.
- Fewer mortgages will be provided and mortgage rates are expected to increase
at a slow pace: daily cites experts
- Some banks report bigger mortgage quotas, faster pace of approval than last
year, with varying paces of approvals.
*** TAKE AWAY: Housing market remains under tight controls, but some banks are
relaxing mortgage approvals.
PBOC will maintain a prudent and neutral monetary policy, People's Daily
said citing Ruan Jianhong, head of central bank's statistics and analysis
- M2 growth lower than before will become a "new normal": Ruan
- Slower M2 data seen from release last week means banks' money are used more in
line with official guidance: Ruan
***TAKE AWAY: PBOC accepts slower M2 growth as normal.
China's money market rates will likely rise given stricter regulations
applied to the bond market: China Securities Journal.
- Regulators issued 10 sets of rules and draft acts seeking feedback in less
than half a month: journal
- More policies push up bond yield: 10-year China Development Bank bonds may
rise to 5% (currently just over 4%): journal cited analysts - 10-year CDB bond
yield may rise to 5.3%; 10-year treasury bond yield may reach 4.3%: newspaper
cited an analyst.
***TAKE AWAY: More bond market regulations seen pushing up yields.
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--MNI Beijing Bureau; +86 10 8532 5998; email: email@example.com