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ASIA

Coming up in the Asia-Pac session on Wednesday:

USDCAD TECHS

Corrective Pullback

US TSYS

Risk-On Carries On

POLICY: China has expressed its concern about the U.S.'s cancellation of additional tariffs and sanctions as well as fair treatment of Chinese companies in the latest video call between Chinese Vice Premier Liu He and the U.S. Treasury Secretary Janet Yellen, according to a statement on the Ministry of Commerce website Tuesday.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY200 billion via 7-day reverse repos with the rate unchanged at 2.2%. The operations lead to a net injection of CNY190 billion after offsetting the maturity of CNY10 billion reverse repos today, according to Wind Information. The operation aims to offset the impact of tax season and the issuance of government bonds, so to keep month-end liquidity stable, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.2454% from Monday's close of 2.1945%, Wind Information showed. The overnight repo average fell to 1.5433% from 1.6111% on Monday.

YUAN: The currency weakened to 6.3812 against the dollar from Monday's close of 6.3810. The PBOC set the dollar-yuan central parity rate lower at 6.3890, compared with the 6.3924 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.9730%, down from Monday's close of 2.9800%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.34% to 3,597.64, while the CSI300 index fell 0.33% to 4,963.10. The Hong Kong's Hang Seng Index decreased 0.36% to 26,038.27.

FROM THE PRESS: China will accelerate the resolution of issues related to the audit and supervision of companies' overseas listings and strengthen cross-border investment monitoring, the Shanghai Securities Journal reported citing a speech by Fang Xinghai, deputy chairman of the China Securities Regulatory Commission. The aim is to improve domestic issuance and listings for overseas entities along with regulations on overseas listings, so that Chinese companies can make better use of both the domestic and international capital markets, said Fang. China will improve and expand the Shanghai-Shenzhen-Hong Kong Stock Connect, Shanghai-London Stock Connect, and China-Japan ETF Connectivity, as well as further opening the futures market, Fang was cited as saying.

The PBOC will orderly carry out climate risk stress tests to respond to any financial stability issues, and improve the green financial system including the establishment of a carbon pricing mechanism, the Shanghai Securities Journal reported citing a speech by PBOC Deputy Governor Liu Guiping. China's coal-based energy and power structures are difficult to fundamentally change in the short term, so financial support cannot be simply withdrawn from the traditional sector too quickly, the newspaper cited Liu as saying. Financial institutions should continue to supply projects meeting the standards of reducing or substituting coal consumption, and seek the orderly exit of projects that fail to meet environmental requirements, said Liu.

Many provinces in China including Hebei, Henan and Guangxi have set up, or are prepared to establish, credit guarantee funds to help resolve risks of state-owned enterprise bonds, the 21st Century Business Herald reported. Such funds are mainly sourced from local finances, SOEs and financial institutions, and will provide credit guarantees and short-term liquidity support for up to three months to SOEs to avoid bond defaults, the newspaper said citing an unnamed insider. The establishment of such funds can help to improve local credit environment, though the final effect could still be limited by the attitude of the government, the management model and size of the fund, the newspaper said citing analysts.

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