MNI China Daily Summary: Tuesday, November 29

EXCLUSIVE: China’s energy prices will jump once the economic recovery gathers steam, but that won’t deter foreign industrial companies from investing more capital to tap prospective growth in domestic demand, Joerg Wuttke, President of the European Union Chamber of Commerce in China, told MNI.

POLICY: China's health authorities will fast-track the vaccination of the elderly and implement more precise measures to control outbreaks, officials said at a National Health Commission press conference. Pandemic control measures must not be inflexible nor variable at different levels, and must be pertinent to specific needs, officials said. Infections should be treated in a scientific manner and authorities will resolve the reasonable demands of the masses, officials said.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY80 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net injection of CNY78 billion after offsetting the maturity of CNY2 billion reverse 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 1.8788% from the close of 1.8366% on Monday, Wind Information showed. The overnight repo average edged up to 1.0289% from the previous 1.0284%.

YUAN: The currency strengthened to 7.1663 against the U.S. dollar from the previous close of 7.1999. The PBOC set the dollar-yuan central parity rate higher at 7.1989, compared with 7.1617 set on Monday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8975%, up from Monday's close of 2.8700%, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 2.31% to 3,149.75, while the CSI300 index rose 3.09% to 3,848.42. Hong Kong's Hang Seng Index rallied 5.24% to 18,204.68.

FROM THE PRESS: The yuan is expected to maintain its stable two-way movement as the Chinese economy continue to improve, while a possibly lower U.S. Dollar Index and weaker U.S. economic performance next year will help yuan regain the seven level against the dollar, 21st Century Business Herald reported citing analysts. Though some speculators short sold the yuan after the PBOC cut banks’ reserve requirement ratio last Friday, the offshore yuan regained lost ground to strengthen above 7.2 against the dollar on Monday, as the China-U.S. interest rate spread narrowed to 78bp despite the RRR cut, the newspaper said. Many emerging market investment funds believe that the RRR cut will help stabilise the economy and the yuan has been underestimated, the newspaper said citing an unnamed private equity fund manager in Hong Kong.

China will allow qualified property developers to restructure with listed companies in the real estate sector, and these listed companies are allowed to issue shares or pay cash to purchase property assets, in a bid to support developers' ability to refinance, Yicai.com reported citing a statement on the website of China Securities Regulatory Commission. CSRC had suspended approval for restructuring and refinancing by developers since 2010 and the relaxation of these conditions will be a great boon, the newspaper said citing analysts. Funds raised should be used to replenish cash flow and for debt repayment, rather than land acquisition or developing new housing projects, the statement said. Listed real estate companies can also refinance in a non-public manner, with funds raised to be used in ensuring the delivery of unfinished housing projects, the statement added.

China's recently launched individual pension system will help transform its financial markets by developing long term investment products and management skills, according to Dong Dengxin, Director of the Institute of Financial Securities, writing for the 21st Century Business Herald late on Monday. He noted that allowing different types of financial institutions to offer pension products will promote competition needed to develop the market rapidly. China’s financial markets have been characterised by short term and speculative investing, and the development of pension products provides an opportunity to develop a longer term investment culture. The scheme will be piloted in the 36 cities before being introduced nationwide.