MNI China Daily Summary: Tuesday, October 31

DATA: China's manufacturing Purchasing Managers' Index fell by 0.7 points to 49.5 in October, falling back to the contractionary zone below the breakeven 50 mark, indicating that the foundation for continued recovery requires further consolidation, data from the National Bureau of Statistics showed. Non-manufacturing PMI registered 50.6, declining from last month's 51.7.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY612 billion via 7-day reverse repo, with the rate unchanged at 1.80%. The operation has led to a net injection of CNY19 billion after offsetting the maturity of CNY593 billion reverse repos today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.1417% from 2.1526%, Wind Information showed. The overnight repo average rose to 1.8591% from 1.6758%.

YUAN: The currency strengthened to 7.3176 against the dollar from 7.3180 on Monday. The PBOC set the dollar-yuan central parity rate lower at 7.1779, compared with 7.1781 set on Monday. The fixing was estimated at 7.3019 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.7125%, down from Monday's close of 2.7275%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.09% to 3,018.77, while the CSI300 lost 0.31% to 3,572.51. The Hang Seng Index fell 1.69% to 17,112.48.

FROM THE PRESS: Guangzhou, one of the four first-tier cities, will offer housing vouchers for resettlement amid urban village transformation. This will allow villagers to deduct a certain amount of payment if they choose to buy commercial housing elsewhere, which will help lower housing stock and help alleviate financing pressure in the initial stage, said Li Yujia, chief research fellow at Guangdong Urban & Rural Planning and Design Institute. Other first-tier cities will likely follow given the oversupply in the housing market, said Li. (Source: 21st Century Business Herald)

China must carefully coordinate monetary and fiscal policy to avoid liquidity tightening in Q4 following the government’s decision to issue an additional CNY1 trillion in treasury bonds, according to Guan Tao, former director at China's State Administration of Foreign Exchange. Guan expects authorities to actively use quantitative and structural monetary tools, such as reserve requirement ratio cuts and open market operations, to alleviate funding pressure and maintain reasonable liquidity. Overall, Guan believes the new treasury bonds will alleviate local-government debt pressure while increasing expenditure intensity and boosting domestic aggregate demand. (Source: Yicai)

China will encourage state-owned insurance companies to play a stronger role to stabilise the medium and long-term capital market, according to the Ministry of Finance. In a policy note, the MoF said SOE firms will have new management rules to guide long-term stable market operation better and prevent short-term behaviour, such as end of year targeting. Specifically, the MoF has adjusted the various operating and financial indicators used to assess SOEs to promote long-term behaviour. (Source: Yicai)