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     TOP NEWS: The CFETS Weekly RMB Index, which measures the strength of the
Chinese yuan against a basket of 24 currencies, had dropped for the fifth week
as of last week, according to data released by the People's Bank of China
(PBOC). The gauge for the five trading days that ended July 20 lost 1.06% from a
week ago to 93.78, which was the lowest level since Aug 28, 2017.
     LIQUIDITY: The PBOC skipped open market operations today after injecting
CNY502 billion in lending by medium-term lending facilities (MLF) yesterday. The
result was a net drain of CNY70 billion due to the maturity of reverse repos,
according to a statement on the PBOC's website. CFETS-ICAP's money-market
sentiment index closed at 37 on Tuesday, up from 31 on Monday.
     MONEY MARKET RATES: Benchmark 7-day deposit repo average rose to 2.6273% on
Tuesday from 2.6182% on Monday; overnight average decreased to 2.3405% from
2.3487% on Monday: Wind Information.
     YUAN: The yuan weakened to 6.8145 against the U.S. dollar on Tuesday from
Monday's 6.7834 closing, following today's weaker fixing. The PBOC set the yuan
central parity rate at 6.7891, weaker than Monday's 6.7593. The drop of 298 pips
marked the lowest fixing since July 11 last year. CNH was on the defensive,
pressured by further stimulus announced by China to boost domestic demand. Both
USDCNH & USDCNY registered a fresh cycle high after the PBOC fixed the yuan at
the weakest level in a year, although both now operate shy of session highs.
     BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.5600%, up from the previous close of 3.5150%, according to Wind Information.
     STOCKS: Shares in Shanghai rose on Tuesday after China outlined new
measures to boost economic growth on Monday night. Shanghai Composite Index
closed 1.61% higher at 2,905.56, marking a third continuous day of gain, led by
infrastructure and steel sectors. Changsheng Bio-Technology was down for a
seventh trading day as the company apologized for producing substandard
rabies-vaccine. Hong Kong's Hang Seng Index rose 1.35% to 28,637.40.
     FROM THE PRESS: China's fiscal policy should work alongside its monetary
policy to serve the real economy more efficiently, stated Chinese Premier Li
Keqiang, according to Xinhua News Agency. China will avoid a deluge of new
stimulus policies, instead tailoring policies to different situations and
maintaining stable macro policies, Li said, according to Xinhua. Local
governments should accelerate the pace of issuing government bonds, using a
total of CNY1.35 trillion in such bonds to support infrastructure projects, Li
added. China will ensure that the state financing guarantee fund is delivered,
targeting CNY140 billion in loans for 150,000 small businesses, Li said,
according to Xinhua.
     Uncertainties in real estate market will increase significantly with the
strengthening of regulation, tighter finances, and the promotion of property
tax, Economic Information Daily reported. China's real estate market has
increased for 37 months, the longest stretch of price rises since June 2015, the
newspaper said, citing Zhang Dawei, chief analyst of Centraline Property. The
government-led shantytown renovation funding has not had the desired effect of
reducing real estate inventories, due to the excessive growth of housing prices
in some cities. Monetization of shantytown renovation and other destocking
policies may end in the second half, the newspaper added.
     The PBOC's increase of low-cost and medium-term liquidity supply will boost
financial institutions' provision of credit and will alleviate the tight credit
situation, China Securities Journal reported. It is "shocking" that the PBOC
injected CNY502 billion by MLF yesterday, adding to already intense OMO
injections in recent days, the newspaper said. The move is consistent, however,
with the PBOC's broadening of the types of collateral accepted in MLF funds, and
with the provision of MLF funds for credit investment, the newspaper said. The
PBOC's new policies may shift its focus to loosening credit to avoid a
significant decline in social financing, the newspaper added, citing
institutions, including CICC.
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI Beijing Bureau; +86 10 8532 5998; email:
[TOPICS: MMQPB$,M$A$$$,M$Q$$$,MBQ$$$,MGQ$$$]

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