MNI China Daily Summary: Wednesday, March 21

     TOP NEWS: The PBOC skipped its open market operations Wednesday, stating

that the liquidity condition is at a "relatively high" level, and the increasing

fiscal expenditure towards month-end can absorb the impact of maturing reverse

repos. This resulted in a net drain of CNY40 billion, as a total of CNY40

billion in reverse repos mature today. CFETS-ICAP's money-market sentiment index

closed at 39 on Tuesday, down from 43 on Monday.

     DATA: China's fiscal spending and revenue recorded double-digit growth in

the January to February period, the Ministry of Finance said Wednesday. The MOF

said fiscal spending increased 16.7% year-on-year to CNY2.91 trillion in the

first two months of the year, compared with an increase of 17.4% same period

last year. Local government spending remained at a high growth speed, while the

growth of central government spending was relatively slow. Central government

spending increased 3.9% year-on-year in Jan-Feb to CNY353.4 billion, compared

with a growth of 8.1% last year. Local government spending rose 18.8% to CNY2.55

trillion, compared with an increase of 19.1% in the same period last year.

     MONEY MARKET RATES: The average 7-day repo rate fell to 2.8096 from 2.8344%

Tuesday, after the PBOC net drained CNY40 billion via its open-market

operations. The overnight repo average rose to 2.5460% from Tuesday's 2.5391%.

     RATES: The Ministry of Finance sold CNY20 billion in 10-year treasury bills

at a yield of 3.8500% at auction Wednesday. This yield was higher than the

3.7906% yield for bonds with the same maturity in the secondary market on

Tuesday.

     RATES: The Ministry of Finance sold CNY20 billion in one-year treasury

bills at a yield of 3.2127% at auction Wednesday. This yield was lower than the

3.3144% yield for bills with the same maturity in the secondary market Tuesday. 

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

daily fixing. The yuan fell 0.06% to 6.3313 against the U.S. unit, compared with

the official closing price of 6.3301 yesterday. The PBOC set the yuan central

parity rate vs the U.S. dollar at 6.3396 on Wednesday, weaker than Tuesday's

6.3246. 

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

3.7625%, down from the previous close of 3.7850%, according to Wind Information.

     STOCKS: Shares declined in Shanghai, led lower by tech companies on ripple

effects from Facebook Inc's data scandal, with Shanghai Baosight Software Co.

Ltd down by more than 6%. The benchmark Shanghai Composite Index closed 0.29%

lower at 3,280.95. Hong Kong's Hang Seng Index gained 0.12% to 31,588.88. 

     FROM THE PRESS: The yuan against the dollar is expected to fluctuate in a

small range, according to a China Securities Journal report, which cited

analysts and market participants. Market participants tend to observe future

movement of the market in the lead-up to the U.S. Fed's interest rate decision,

and are currently cautious about making transactions. The FX market is still

waiting to see if the Fed's is hawkish following the FOMC meeting. The monetary

policy direction of European Central Bank and concerns of a global trade war are

also affecting market sentiment in China, the Journal cited market insiders as

saying.

     The continuity and stability of macro-policies need to be maintained, while

making slight alterations according to specific situations, said Xiao Yanshun,

who helped draft the government report on China's economic goals for this year,

according to 21st Century Business Herald. Making just minor changes to the

fiscal and monetary policies could help stabilise market predictions, Xiao said.

China can only focus on further reform, the restructuring of its economy, and

seeking greater momentum when economic growth is in a reasonable range, and when

employment growth and income growth are improved, Xiao noted.

     Large property developers in China are increasingly seeking IPOs for

financing due to fierce competition in the segment, the Economic Information

Daily reported. Consolidation is heating up among developers, which could see

another high point, the Daily said, noting few of the top 100 property companies

are still private. 

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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