MNI China Daily Summary: Tuesday, March 27

     TOP NEWS: The PBOC skipped OMOs Tuesday, stating that increasing fiscal

expenditure towards month-end can absorb the impact of maturing reverse repos,

and to keep liquidity condition at a "reasonable and stable" level. This

resulted in a net drain of CNY10 billion after the same amount of reverse repos

matured. CFETS-ICAP's money-market sentiment index closed at 46 on Monday, up

from 39 on Friday.

     DATA: Combined profits at Chinese industrial companies rose 16.1%

year-on-year in the first two months to CNY968.9 billion, the National Bureau of

Statistics said Tuesday. That compared with an increase of 10.8% year-on-year in

December 2017. The bureau didn't release the breakdown for each month

separately, smoothing any volatility due to the different dates of Chinese New

Year every year. Among 41 industries, 29 industries, including most mining and

manufacturing companies, saw their profits rising on a year-on-year basis. 1

industry saw a flat reading and 11 industries saw profits falling. "The rapid

increase in production, as well as sales, has balanced out rising product

prices, which has led to industrial profits growing faster than in December",

said He Ping with Industry Division under the NBS.

     MONEY MARKET RATES: The average 7-day repo rate increased to 2.8436% from

2.8312% on Monday, after the PBOC net drained CNY10 billion via its open-market

operations. The overnight repo average rose to 2.5851% from Monday's 2.5285%.

     YUAN: The yuan gained against the U.S. dollar after the PBOC set a much

stronger daily fixing. The yuan rose 0.47% to 6.2510 against the U.S. unit,

compared with the official closing price of 6.2849 yesterday. The People's Bank

of China set the yuan central parity rate vs the U.S. dollar at 6.2816 on

Tuesday, 377 bps stronger than Monday's parity - the biggest daily rise since

Oct 17, 2017.

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

3.7450%, up from the previous close of 3.7300%, according to Wind Information.

     STOCKS: Shares rose in Shanghai, led by agriculture-related companies, with

Great Sun Foods up by close to the daily-limit 10%. The benchmark Shanghai

Composite Index closed 1.05% higher at 3,166.65. Hong Kong's Hang Seng Index

gained 0.83% to 30,801.23. 

     FROM THE PRESS: U.S. protectionist action such as increasing tariffs on

goods from foreign countries and asking other countries to take measures as it

demands makes it looks like a "destroyer" of the current international trade

system, an official People's Daily said in a commentary. The U.S. bypassed the

WTO, and as one of the main creators of the organization, this is disappointing

the world, the Daily said. The fair trade the U.S. wants is essentially trade

that benefits the US, and other countries don't necessary have to be treated

fairly, the commentary said.

     Chinese Premier Li Keqiang stated on Monday there would be no winners in a

trade war, according to the official Communist Party newspaper People's Daily.

Sino-U.S. trade is essentially a win-win based on market forces, otherwise its

scale could not be so huge, Li said. As for the trade imbalance, the two nations

should maintain rationality, resolve conflicts through negotiations and address

the trade balance through "enlarging the added trade volume," Li said. Li also

stressed China will further reform and open its market, as well as protect

intellectual property. 

     The yuan is expected to extend its upward trend while fluctuations may

exist, China Securities Journal reported Tuesday. The yuan's close yesterday was

391 pips higher than Friday, the peak since early Feb, said the Journal. A

weaker dollar, which is being dragged down by the Fed's less hawkish stance than

the market expected, and China-U.S. trade conflict escalation, helped with the

yuan strengthening, the report said. The launch of China's yuan-denominated

crude oil futures on Monday also increased demand for the yuan.

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

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

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