MNI China Daily Summary: Tuesday, Sept. 26

     TOP NEWS: The People's Bank of China has told Chinese commercial banks to

strictly implement United Nations sanctions against North Korea, the South China

Morning Post reported, citing four unidentified sources. The central bank told

Chinese banks to stop offering financial services to North Koreans and gradually

end loan services for existing North Korean clients, the newspaper said. Wang

Jingdong, a vice president of  Industrial and Commercial Bank of China, China's

largest commercial bank by assets, said Monday that ICBC would "strictly

implement the U.N. Security Council decisions related to North Korea and

carefully fulfil relevant international responsibilities," according to the

report. (South China Morning Post)

     LIQUIDITY: The People's Bank of China injected CNY40 billion in 14-day

reverse repos and CNY10 billion in 28-day reverse repos via open-market

operations Tuesday. This resulted in a net drain of CNY80 billion for the day,

as a total of CNY130 billion in reverse repos matured on Tuesday. The CFETS-ICAP

money-market sentiment index rose to 57 on Monday, up from 42 at Friday's close.

The lower the reading, the better the liquidity conditions in the interbank

market.

     RATES: Money market rates rose after the PBOC drained a net CNY80 billion

for the day and as the end of the quarter approached. The seven-day repo average

was last at 3.1379%, higher than Monday's average of 3.0680%. The overnight repo

average was at 2.8756%, higher than Monday's 2.7764%.

     YUAN: The yuan fell against the U.S. dollar after the PBOC set a weaker

fixing for the day. The yuan was last at 6.6207 against the U.S. unit, slightly

weaker than the official closing price of 6.6205 on Monday. The People's Bank of

China set the yuan central parity rate against the U.S. dollar at 6.6076 on

Tuesday, weaker than Monday's 6.5945. Today's fixing was the lowest since Aug.

30.

     BONDS: The yield on benchmark 10-year China government bonds was last at

3.5811%, up from the previous close of 3.5553%, according to Wind, a financial

data provider.

     STOCKS: Stocks were up, led up by the coal, automobile and real estate

sectors. The benchmark Shanghai Composite Index closed 0.06% higher at 3,343.58.

Hong Kong's Hang Seng Index was 0.08% lower at 27,479.17.

     FROM THE PRESS: After eight Chinese Tier-2 cities, including seven

provincial capitals, issued new policies over the weekend to curb property

speculation, share prices for property development firms fell sharply on both

the domestic A share and Hong Kong stock markets, Caixin reported. Shares of

property companies located in Tier-2 and Tier-3 cities suffered the biggest

losses, with more than 20 mainland property developers seeing their share prices

dip by more than 10%. (Caixin)

     China is still encouraging blockchain technology though it recently banned

initial coin offerings (ICOs) and closed domestic trading platforms for virtual

currencies, the Financial News, a newspaper managed by the People's Bank of

China, reported Tuesday. China's measures to curb virtual currency trading will

not impact the development and study of blockchain technology as virtual

currencies and blockchain technology are different and should be judged

differently, the newspaper said, citing analysts. Sun Guofeng, head of the

financial research institute at the PBOC, told the newspaper that blockchain is

a good technology that should not be equated with ICOs, and people should expand

their horizons on developing it. (Financial News)

     In the final days before the week-long "Golden Week" holiday, a debate has

emerged in the market on whether to hold onto bonds through the holiday or to

cash out now, the China Securities Journal said Tuesday, citing analysts.

Holding bonds to lock in current yields would be a better choice, the newspaper

argued, since there is a strong chance that liquidity will be loosened at the

end of the month and it may improve further after the holiday. Though

uncertainties over the monetary policies of the U.S. Federal Reserve and the

European Central Bank do pose risks, those risks won't materialize during the

holiday, analysts were quoted as saying. In the short term, the market is

optimistic due to recent relatively weak economic data and expectations for

improved money supply ahead, experts said. As the market becomes accustomed to

new regulations, the bond market could gain momentum, the newspaper said. (China

Securities Journal)

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

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

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