MNI China Daily Summary: Tuesday, January 16

     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

differences: Xi 

- 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

four months. 

- 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

commercial bank.

     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

Friday's close 

- 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

bureau. 

- 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.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]