MNI China Daily Summary: Tuesday, May 8

     TOP NEWS: China's exports in April surged 12.9% on a year-over-year basis

to USD200.44 billion, according to data released by the General Administration

of Customs on Tuesday. It was faster than MNI's surveyed 8.0% growth, and back

in positive territory after March's 2.7% drop. Export growth for the first four

months rose 13.7% year-over-year to USD745.73 billion. Imports growth climbed to

21.5% y/y from a year earlier to USD 171.65 billion, stronger than the market

consensus' 16.0% increase. The faster pace has consolidated the solid momentum

of imports in the first four months, which increased by 19.6% to USD668.98

billion.

     TOP NEWS: Chinese Vice Premier Liu He will visit Washington next week,

though other details have not yet been confirmed, according to the White House.

Liu will meet with U.S. trade representatives and officials for another round of

negotiations on trade. 

***Comments: Liu's return to the U.S. is happening earlier than some expected,

as the U.S. delegation only left Beijing last week. The two sides' displayed

willingness to negotiate has deescalated the tensions, although they are not any

more likely to agree on major issues including trade deficit and intellectual

property protection.

     DATA: The appreciation of the dollar and falling asset prices drove down

the value of China's foreign-exchange reserves in April, according to the PBOC

and State Administration of Foreign Exchange (SAFE). FX reserves fell by $17.97

billion to $3.12 trillion as of Apr 30, compared with an increase of $8.34

billion in March. The U.S. dollar index (DXY), which tracks the greenback

against a basket of currencies, rose to 91.84 on Apr 30, up from 89.98 on Mar

31.

     LIQUIDITY: The PBOC skipped OMO on Tuesday, stating that the current

liquidity condition is at a "relatively high" level. This left liquidity

unchanged as no reverse repos matured today. CFETS-ICAP's money-market sentiment

index closed at 33 on Monday, the same as Friday. 

     MONEY MARKET RATES: 7-day repo average fell to 2.6811% from 2.6938% on

Monday. The overnight repo average rose to 2.5546% from Monday's 2.5509%. 

     YUAN: The yuan gained against the U.S. dollar despite a weaker daily

fixing. The yuan rose 0.03% to 6.3617 against the U.S. unit, compared with the

official closing price of 6.3649 yesterday. The PBOC set the yuan central parity

rate at 6.3674 Tuesday, weaker than Monday's 6.3584. The central bank has set

the fixing weaker for two trading days in a row.

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

3.6700%, up from the previous close of 3.6500%, according to Wind Information. 

     STOCKS: Shares rose in Shanghai, led by insurance companies on speculation

further opening up the insurance sector may attract foreign investment, with

China Pacific Insurance Co. up more than 5%. The benchmark Shanghai Composite

Index closed 0.79% higher at 3,161.50. Hong Kong's Hang Seng Index gained 1.42%

to 30,419.43. 

     FROM THE PRESS: The yuan against the dollar is expected to fluctuate both

ways, Securities Times said in a front-page commentary. Though the dollar has

been strengthening for more than ten days, CNY indexes - which reflect the

yuan's value against ten major currencies - have been rising since mid-April,

the commentary said. In the short term, the foreign exchange settlements are not

expected to help with the depreciation of the yuan, the newspaper said. In the

medium term, the Chinese government is expected to defend the yuan given

USD3.125 trillion FX reserves are sufficient to stabilize the yuan exchange

rate. As capital outflow has been restricted, there won't be large fluctuations

in the yuan, the newspaper said.

     China's long-awaited public real estate investment trust (REITS) will be

launched as recently as this year, China Securities Journal reported. The basic

framework is likely to be fixed-asset security funds and asset-backed

securities, the newspaper said, citing unidentified market participants. As the

Chinese government is campaigning to deleverage and develop its rental housing

market, securitization of rental housing assets will advance, the newspaper

said. 

***Comments: The launch of public REITS in the near future could open up a large

investment market for Chinese citizens as it allows them to invest in the

property sector outside of simply buying houses. 

--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

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