MNI China Daily Summary: Tuesday, January 23

     TOP NEWS: Profits earned by China's state-owned companies in 2017 rose

23.5% from a year ago to CNY2.9 trillion, data from the Ministry of Finance

released Tuesday show. 

- Revenues for SOEs rose 13.6% y/y to CNY52.2 trillion; 

- Central-administered SOEs made a combined CNY1.8 trillion in profits last

year, a 16% increase y/y, while revenues rose 12.5% to CNY30.8 trillion; 

- Profitability in the coal, transportation, petrochemical industries surged

y/y, while power generation companies saw their profits drop.

     LIQUIDITY: PBOC injected CNY80 billion in 7-day reverse repos, CNY80

billion in 14-day reverse repos, and CNY10 billion in 63-day reverse repos via

Open Market Operations (OMO). 

- Liquidity was unchanged after CNY170 billion reverse repos mature. 

- Benchmark 7-day deposit repo average last at 2.6914%, vs 2.9159% on Monday.

     RATES: Interbank market rates fell following the PBOC's open-market

operation that resulted in no net injection. 

- 7-day repo average last at 2.8382%,lower than 2.9159% yesterday 

- Overnight repo average 2.5752%, lower than 2.7436% yesterday. 

***COMMENT: The PBOC continues to juggle to maintain stable liquidity ahead of

China's lunar New Year Festival. 

     YUAN: The Chinese yuan climbed to 6.4005 against the U.S. dollar from

yesterday's 6.4036 closing, following today's stronger fixing.

- The PBOC set the yuan central parity rate vs the U.S. dollar at 6.4009 on

Tuesday, stronger than Monday's 6.4112. 

- The PBOC has set a stronger fixing for three consecutive trading days. 

- Today's fixing is the highest since Dec 7, 2015.

***COMMENT: Market sources said USD-CNY would continue to weaken, tracking a

weaker U.S dollar index. The ECB's meeting on Thursday may also affect the

Yuan's outlook.

     BONDS: The yield on 10-year China government bonds last traded 3.9500%,

unchanged from the close Monday: Wind Information

     STOCK: The Shanghai Composite Index closed up 1.29% to 3,546.50, while the

Hang Seng Index rose 1.47% to 32,868.53.

     FROM THE PRESS: China's central bank will conduct its open market

operations (OMO) at a proper and steady pace to stabilize liquidity in the

interbank market amid rising cash needs ahead of the oncoming Chinese New Year

holiday, Financial News reported citing market sources and analysts. 

- Corporate tax payment season has passed. 

- Planned targeted reduction in reserve requirement ratio and contingent reserve

arrangement programs will boost liquidity, Financial News said. 

***COMMENT: PBOC is improving communication via regular OMOs to smoothen market

expectation and maintain steadiness.

     China banks have seen deposits slowing, while loans continue to increase,

the 21st Century Business Herald reported. 

- Deposits at by non-banking financial institutions declined sharply last year

following stricter regulations on interbank transactions and the appeal of the

wealth management products. 

- Mortgage loan growth slowed on property purchase curbs; Corporate loan

increased on robust economy. 

***COMMENT: The PBOC is expected to hikes deposit rates to encourage household

saving, leaving lending rates unchanged to help boost growth.

     China's housing sales will likely decline in 2018 while prices could pick

up slightly, the Economic Information Daily reported, citing Ouyang Jie, vice

president of Future Land Corporation. Gov't curbs on the property sector will

likely remain for the next five years, so the restrictions on obtaining

mortgages, property purchases and price gains will continue, the newspaper said.

***Comment: China's property market will continue to be under administrative

heavy-handedness, with restricted capital discouraging purchases and

investments.

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

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

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