MNI China Daily Summary: Tuesday, October 29

     EXCLUSIVE: Chinese retail sales will pick up in the fourth quarter,

underpinning economic growth following a record low 6% y/y rise in GDP in Q3,

government advisors told MNI. The rate of expansion in retail sales may rise to

around 8% y/y in the fourth quarter, from 7.8% in September, helping to

stabilise GDP growth at 6% in the final three months of the year, said Zhang

Yiqun, director of the fiscal studies institute affiliated with the Jilin

province finance department. That would mean annual growth would fall in the

target range of 6 - 6.5%, Zhang added, suggesting that the government further

stimulates consumption by boosting incomes, reducing charges for services such

as telephones and internet, and relaxing restrictions preventing researchers,

teachers and health workers from seeking additional private incomes.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

for the second day, draining net CNY250 billion liquidity given the same amount

of reverse repos maturing today, according to Wind Information. The increased

fiscal spending near month-end can offset the maturity of reverse repos, leaving

reasonable and ample level of liquidity, PBOC said.

     The PBOC is likely to conduct targeted medium-term lending facility (TMLF)

this week to offset the maturity of CNY590 billion reverse repos, as the central

bank generally conducts TMLF in the fourth week of the first month at the

beginning of a quarter, the China Securities Journal reported citing unnamed

analysts. The PBOC is also likely to increase cash injection via pledged

supplementary lending (PSL) to further support infrastructure investment, the

newspaper said citing Chen Wenhu, analyst at Zhongshan Securities.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007)increased to 2.6765% from Friday's close of 2.6745%, Wind

Information showed. The overnight repo average fell to 2.3636% from Friday's

2.4709%.

     YUAN: The yuan weakened to 7.0637 against the dollar from Monday's close of

7.0615. PBOC set the dollar-yuan central parity rate firmer at 7.0617, strongest

since Aug 26 and compared with previous 7.0762.

     BONDS: The yield on 10-year China Government Bonds was last at 3.3000%, up

from the close of 3.29000% on Monday, according to Wind Information. Yield is

likely to stabilize around 3.3%, as the market expects the Chinese economy to

pick up given improved financial data in August and September, the China

Securities Journal reported citing Zhang Jiqiang, analyst at Huatai Securities.

The faster medium- and long-term credit growth will ease the downward pressure,

the newspaper cited Zhang as saying. The yield could still rise above 3.3% if

PBOC fails to conduct TMLF as the market expects this week, the newspaper said

citing Xie Yunliang, analyst at Minsheng Securities. 

     STOCKS: The Shanghai Composite Index fell 0.87% to 2,954.18 as brokerage

stocks tumbled, while blockchain shares continued to rally following President

Xi Jinping's endorsement of the technology. Hong Kong's Hang Seng Index

decreased 0.39% to 26,786.76.

     FROM THE PRESS: Chinese smaller property developers face increasingly

higher costs and difficulties obtaining capital as regulators rein in banks'

lending to them by ex-balance sheet channels, while overseas capital-raising

becomes more expensive, the 21st Century Business Herald reported citing Yan

Yuejin, director of the Shanghai-based E-house China Research and Development

Institution. There have been 408 property developers filing bankruptcy with

courts by Oct 27, the newspaper said citing court website. Housing prices may

face corrections, Yan was cited as saying.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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