MNI China Daily Summary: Tuesday, November 5

EXCLUSIVE: Calls for Beijing to establish a stock market stabilisation fund are likely premature, particularly as the A-share market continues to perform, advisors and analysts told MNI, noting policymakers will pursue its introduction in due time to encourage more long-term investors.

POLICY: China will hold a press briefing for the 12th Session of the 14th National People's Congress Standing Committee in the Hong Kong Hall of the Great Hall of the People on Friday Nov 8 stating 4.00pm, the Chinese Foreign Ministry said.

POLICY: China’s Warehousing Index reached 49.4 in October, down 0.4 percentage points from September, the China Federation of Logistics and Purchasing (CFLP), said.

POLICY:China’s Caixin General Services PMI reached 52.0 in October, up from 50.3 in September, marking the fastest rate of growth in three months, Caixin said.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY18.3 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY364.5 billion after offsetting the maturity of CNY382.8 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.5425% from the previous 1.5411%, Wind Information showed. The overnight repo average increased to 1.3410% from 1.3408%.

YUAN: The currency weakened to 7.1095 against the dollar from the previous 7.0974. The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1016, compared with 7.1203 set on Monday. 

BONDS: The yield on 10-year China Government Bonds was last at 2.0700%, down from the close of 2.0900% previously, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index was up 2.32% to 3,386.99, while the CSI300 index rose 2.53% to 4,044.57. The Hang Seng Index gained 2.14% at 21,006.97.

FROM THE PRESS: China is likely to issue new local government bonds to swap out local debt rather than special treasury bonds, according to Mingming, chief economist at CITIC Securities. According to Xinhua, a state media outlet, China’s Standing Committee of the 14th National People's Congress had recently deliberated on the State Council's proposal to increase the local government debt limit to replace the implicit debt, Ming noted. Wen Laicheng, a professor at the Central University of Finance and Economics, said using local government bonds could reduce debt costs and risks whilst avoiding the moral hazard of centrally backed special treasury bonds. (Source: 21st Century Herald)

House prices are expected to stabilise in Q4 after October saw the release of suppressed home buying demand going back three years, China Business Journal has reported. However, property prices have little chance of increasing in the short term despite market declines significantly narrowing, the newspaper said, citing the E-house China Research and Development Institution. New home sale contracts signed online grew by 0.9% y/y last month nationwide, up 12.5 percentage points from September and marking the first increase in 15 consecutive months, Housing Ministry data showed. The second-hand housing market also saw a 8.9% year-on-year increase, achieving year-on-year growth for seven consecutive months.

China’s new yuan loans could fall in October from September due to seasonal factors, but recent policy stimulus measures, especially for the housing market, would enhance banking credit supply capacity, Securities Daily reported, citing analysts. New yuan loans and aggregate finance are expected to be around CNY600 billion and CNY1.5 trillion in October, compared to September’s CNY1.59 trillion and CNY3.76 trillion, said Liang Si, a researcher at the Bank of China Research Institute, noting policy effects would have a time lag. The People’s Bank of China is set to release its monthly financial data next week.