MNI China Daily Summary: Tuesday, July 7

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

for the seventh day, draining CNY110 billion given the same amount of reverse

repos matured, according to Wind Information. The total liquidity in the banking

system is reasonable and ample, the PBOC said on its website.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) increased to 2.0613% from Monday's close of 1.7354%, Wind

Information showed. The overnight repo average rose to 1.7133% from the previous

1.3505%.

     YUAN: The currency strengthened to 7.0241 against the dollar from 7.0330 on

Monday. The PBOC set the dollar-yuan central parity rate lower at 7.0310,

compared with the 7.0663 set on Monday, the biggest jump since April 9. 

     BONDS: The yield on 10-year China Government Bond was last at 3.0150 %, up

from the close of 3.0100% on Monday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index increased 0.36% to 3,345.34. Hang Seng

Index lost 1.38% to 25975.66.

     FROM THE PRESS: China's major state-owned financial media outlets all

published frontpage reports on the current rally in domestic stocks, cautioning

investors to be "rational." The Securities Times said that investors,

particularly small and medium-sized investors, should forgo the

get-rich-overnight mentality and remember risk. The Securities Daily said shares

of sectors such as tourism, aviation and food catering may continue to decline

in H2 even as some sectors recover.

     A small number of Chinese commercial banks may be allowed to deal

securities in the future by regulators either through direct licenses or

acquiring securities firms with financial risks, the China Securities Journal

reported citing anonymous sources. Even if banks could only invest 5% of capital

in the securities industry, the total net assets of securities companies would

increase by 50%, the journal said citing Lian Ping, the chief economist with

Zhixin Fund.

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

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

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