MNI China Daily Summary: Wednesday, February 19

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

for the second day, leaving liquidity unchanged, according to Wind Information.

With the maturity of reverse repos, the short-term liquidity injected by the

central bank through OMOs after the Spring Festival has largely been drained.

Total liquidity in the banking system is at a reasonable and ample level, PBOC

said on its website.

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

institutions (DR007) decreased to 2.1150% from Tuesday's close 2.2073%, Wind

Information showed. Overnight repo average rose to 1.6037% from 1.4959%

yesterday.

     YUAN: The yuan strengthened to 6.9941 against the dollar from Tuesday's

close 7.0052. PBOC set the dollar-yuan central parity rate higher at 7.0012,

compared with 6.9826 on Tuesday, the first time fixed above 7 since Dec. 25,

2019.

     BONDS: The yield on 10-year China Government Bonds was last at 2.9050%, up

from Tuesday's close of 2.8950%, according to Wind Information.

     STOCKS: The Shanghai Composite Index lost 0.32% to 2,975.40. Hong Kong's

Hang Seng Index rallied 0.46% to 27,655.81.

     FROM THE PRESS: China will exempt SMEs across the nation and all companies

in Hubei province, the epicentre of the coronavirus epidemic, from mandatory

contributions to pension funds, unemployment insurance and work injury insurance

from February to June, according to a statement on the government website

following an executive meeting of the State Council. For large companies outside

Hubei, these contributions will be halved from February to April, the statement

said.

     The PBOC is expected to extend CNY600 billion more in Pledged Supplement

Loans (PSL) to commercial banks this year to support the economy as it deals

with the impact of the epidemic, the China Securities Journal reported citing

Bian Quanshui, chief analyst of macroeconomy with Sinolink Securities. The

government will adopt PSL and other quasi-fiscal tools this year to support the

economy, the newspaper said.

     China is confident in its capability to achieve its economic growth targets

this year despite the short-term impact of the epidemic, the People's Daily said

in a commentary. Countercyclical policies will alleviate pressure on companies,

strengthen confidence and stabilize investment expectations, the commentary

said.

--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

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