MNI China Daily Summary: Tuesday, June 19

     TOP NEWS: The PBOC will continue to implement a prudent and neutral

monetary policy, strengthen its support for the real economy, such as small and

micro businesses, it said on its website. The PBOC will stabilize market

expectations to advance the reform and opening up of the financial sector, the

PBOC said. Risks in the bond market are controllable and recent bond defaults

are caused by improving market behavior and tighter regulation to clamp down on

guaranteed returns for investors, but the overall bond default rate is not high,

the PBOC said.

     TOP NEWS: China again condemned the U.S. action to apply unilateral tariffs

as reversing market and global development trend. China will have to resort to

other measures as counter measures if the U.S. government turned irrational and

issues another list to slap additional tariffs on Chinese products, China

Ministry of Commerce said Tuesday. China will advance reform and opening

decidedly, and improve its economy to a high-quality growth track, the ministry

said. 

     LIQUIDITY: The PBOC injected CNY70 billion 7-day, CNY20 billion 14-day

reverse repos, and CNY10 billion 28-day reverse repos on Tuesday, resulting in a

net injection of CNY50 billion as a total of CNY50 billion reverse repos matured

today. A total of CNY230 billion in reverse repos will mature this week.

CFETS-ICAP's money-market sentiment index closed at 37 on Friday, down from 40

on Thursday.

     POLICY: Standard Chartered writes that China will likely manage the CNY

lower against the USD amid the escalating trade war risks. This will likely be a

gradual process to ensure expectations for weakness don't return and refrain

from weakening too quickly to rein in the pace of depreciation, it said.

     YUAN: The escalation of the China-US trade conflict has failed to

significantly impact USDCNH. However, risks appear tilted to the downside for

the yuan from both a short- and medium-term perspective. While the currency pair

has not been particularly responsive to the increasingly intense trade spat

between China and the U.S., on balance it is likely to prove yuan negative given

the country's higher degree of trade openness and reliance on price-competitive

exports. There is also a small but growing risk that Beijing looks to combat

trade tariffs by weakening the yuan in order to maintain its export

competitiveness.

     MONEY MARKET RATES: 7-day repo average last dropped to 2.7158% from the

2.7627% recorded last Friday. Overnight repo average fell to 2.5609% from

2.5630% last Friday.

     YUAN: The currency weakened to 6.4450 against the U.S. dollar on Tuesday

from last Friday's 6.4168 closing, following today's weaker fixing. The PBOC set

the yuan central parity rate at 6.4235 earlier today, stronger than the 6.4306

set before China's three-day Dragon Boat Festival holiday.

     BONDS: The yield on benchmark 10-year China Government Bond was last at

3.6100%, down from the previous close of 3.6325%, according to Wind Information.

     STOCKS: Shares closed sharply lower in Shanghai as a result of the

escalation in trade tensions between China and the U.S. The benchmark Shanghai

Composite Index closed 3.78% lower at 2907.82. Hong Kong's Hang Seng Index

lowered at 3.13% to 29361.03. ZTE stock hits limit down for a consecutive fourth

day as U.S. Congress is attempting to reinstate sanctions on the company lifted

by President Trump.

     FROM THE PRESS: All countries should defend multilateral frameworks such as

the World Trade Organization and abandon unilateralism, Xinhua News Agency said

in a commentary. The U.S. tariff action against many countries, including China,

the European Union, Canada and Mexico, casts uncertainties on the outlook of the

global economy, it said. A just cause enjoys abundant support while an unjust

cause finds little support, Xinhua said, noting that the States' protectionist

moves lack international support, according to the commentary.

     As risk controls and deleveraging campaigns proceed, some Chinese companies

have failed to issue bonds or delayed issuances, Economic Information Daily

reported. More than 300 bonds bonds were cancelled or postponed so far, coming

to a total of more than CNY227 billion, the newspaper said. Investors are less

willing to invest in lower-rating bonds amid recent bond defaults in China, and

strict financial regulations have also pressed investors' cashflow; thus, they

are more cautious in selecting areas of investment, the report said, citing Ming

Ming, analyst at Citic Securities. The high cost of financing from the bond

market also caused some companies to resort to bond cancellations and delays,

with yields for some low-rated bonds exceeding 7.0% and some reaching as high as

9.5%, it said.

     China has finished building the nationwide online database for real estate

registration, which will help the central government keep a comprehensive

account of the real situation in the property market, Economic Information Daily

reported. Property controls have continued to tighten in May and June, with

Jiaxing city of Zhejiang province further restricting property developers'

illegal practices in mid-June, the newspaper said. Tight policy controls are

likely to further dampen growth of the property market, the report said.

***Comments: The completion of the real estate registration online database is

an important step in implementing property tax nationwide in China. It will more

clearly display information on home owners and land. The central government has

vowed to implement property tax to curb speculation in the sector.

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--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

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