MNI China Daily Summary: Tuesday, September 4

     TOP NEWS: China will pursue win-win partnerships with other nations, oppose

protectionism and unilateralism, further open up its markets and pursue

relationships based on fairness and mutual respect, President Xi Jinping said

Monday at the opening of the China-Africa forum, broadcast on China Central

Television. Xi promised to extend USD60 billion credit to African countries, and

said China is willing to deepen cooperation with Africa under the Belt and Road

Initiative. 

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

operations on Tuesday, citing a "relatively high level of liquidity." The

inaction left liquidity level unchanged, as no reverse repos matured today,

according to Wind Information. Today is the 10th day the PBOC has skipped OMO.

About CNY176.5 billion in one-year MLF will mature this week with no expiring

reverse repos. CFETS-ICAP's money-market sentiment index closed at 34 on Monday,

up from 28 on Friday.

     YUAN: The yuan fell to 6.8294 against the U.S. dollar from Monday's closing

of 6.8165. Earlier today, the PBOC set the yuan central parity rate at 6.8183,

up from 6.8347 yesterday. That followed four consecutive days of weaker fixing.

     YUAN: USDCNH closed below its 21-dma yesterday and has edged down slightly

today trading at 6.8340 as of 2:10 pm Beijing time. A close below 6.8000 would

be very bearish and suggest that a topping process is in play. - Rate and equity

markets are sending some slightly positive signals in this regard, with the

2-year swap threatening to break above its 55-dma to build on its recovery and

both local and Hong Kong stocks up over 1%. Given the close cross-asset

correlation in China, this should provide support to the yuan.

     MONEY MARKET RATES: The benchmark 7-day deposit repo average dropped to

2.5129% from 2.5761% on Tuesday; overnight average decreased to 2.1799% from

2.2531%: Wind Information.

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.6200%, up from the previous close of 3.6000%, according to Wind Information.

     STOCKS: The Shanghai Composite Index closed 1.10% higher at 2,750.58. Hong

Kong's Hang Seng Index rose 0.81% to 27,936.12.

     FROM THE PRESS: As China's deleveraging campaign deepens, an increasing

number of bond sales have been cancelled or postponed, Economic Information

Daily reported. About 531 bonds worth CNY330 billion were cancelled or postponed

this year, the daily said. In August, there were 75 bonds worth CNY46.12

cancelled or postponed, the newspaper said. Some issuers and investors could not

reach a consensus in coupon rates, the newspaper said, citing Zhang Xu, the

chief analyst at Everbright Securities. The situation reflected the tightening

financing environment of corporate bonds, according to other industry insiders.

     Overseas financial institutions purchased CNY66.526 billion

yuan-denominated Chinese bonds in July, down from CNY110.369 billion in June,

with the total reaching CNY 1,612.292 billion, Economic Information Daily

reported. The slowdown was caused by a narrower spread between Chinese and U.S.

interest rates and the depreciation of the yuan, the newspaper reported citing

Chen Xiao, an analyst of China Pingan Securities.

     Since 2007, about 50 Chinese companies have invested USD1.5 billion in the

Zambia-China Economic Trade and Cooperation Zone, China's first such project in

Africa, the Economic Information Daily reported. More than 17 state-owned

companies cooperate in Zambia on resources, infrastructure, manufacturing and

agriculture, the daily said. 

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

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

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