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DATA: The China Purchasing Managers' Index (PMI) rebounded to 50.1 in November from October's 49.2, back to expansion above the breakeven 50 level, hitting the highest in three months, as an electricity crunch eased and the prices of some raw materials dropped significantly, data from the National Bureau of Statistics on Tuesday showed.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY100 billion via 7-day reverse repos with the rates unchanged at 2.2%. The operation has led to a net injection of CNY50 billion after offsetting the maturity of CNY50 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.3950% from Monday's close of 2.2474, Wind Information showed. The overnight repo average rose to 2.1764% from 1.8615% on Monday.
YUAN: The currency strengthened to 6.3701 against the dollar from Monday's close of 6.3821. The PBOC set the dollar-yuan central parity rate lower at 6.3794, compared with 6.3872 set on Monday.
BONDS: The yield on 10-year China Government Bonds was last at 2.8750%, down from Monday's close of 2.8760, according to Wind Information.
STOCKS: The Shanghai Composite Index gained 0.03% to 3,563.89, while the CSI300 index edged down 0.40% to 4,832.03. The Hong Kong's Hang Seng Index fell 1.58% to 23,475.26.
FROM THE PRESS: The PBOC may increase liquidity injection via reverse repos, renew maturing MLFs with excess, or even cut banks' reserve ratios, to keep year-end liquidity stable and prevent upsurge in market rates, the Securities Daily reported citing analyst Wang Qing with Golden Credit Rating. Increasing reverse repos and MLF can meet the liquidity gap in December, but an RRR cut is still possible by yearend if the PBOC aims to release a pro-growth signal and boost credit and aggregate finance, Wang was cited as saying. There will be CNY950 billion MLF maturing in December, which will be the second-highest this year, along with local government bond issuance, and assessment on banks to drain liquidity, the daily said.
China should consider increasing the allocation of U.S. dollar assets in foreign exchange reserves, adhere to a prudent monetary policy, improve global policy communication and establish a risk warning system to effectively respond to the impact of the shift in U.S. monetary policy, said the Economic Daily in a commentary. The rebound of the dollar index will help ease the continued appreciation pressure of the Chinese yuan, though the currency will still be supported by China’s exports and tend to fluctuate in two ways, the newspaper said. The narrowing China-U.S. interest spread may lead to faster foreign capital outflows, and commodity prices may become more volatile, the newspaper said.
Debt raised through China’s so-called local government financing vehicles rose to CNY5.1 trillion this year, CNY400 billion more than the previous record, as loose liquidity helped these entities owned by local authorities borrow more funds, the 21st Century Business Herald said using data by Wind. As usual, most of the money raised was for repaying debt and the net capital raised, at CNY1.65 trillion, was lower than that of 2020, it said. Under China’s tiered management of these debt instruments, the proportion of lower-credit debt has declined, the more developed regions are raising more debt while debt by those of low credit standings has sharply fallen, said the newspaper. As of Nov. 28, China’s outstanding LGFV debt stood at CNY12.75 trillion, the newspaper said.