MNI China Daily Summary: Wednesday, Nov 08

POLICY: The People’s Bank of China (PBOC) will ensure the stability of the yuan exchange rate and continue to reduce the actual lending rate whilst pursuing transformation of economic growth, Pan Gongsheng, the governor of the People’s Bank of China told the Financial Street Forum in Beijing.

POLICY: The PBOC will provide emergency liquidity support when necessary to heavily indebted local governments and enhance credit aid to property developers, Governor Pan Gongsheng said.

LIQUIDITY: The PBOC conducted CNY474 billion via 7-day reverse repo, with the rate unchanged at 1.80%. The operation has led to a net injection of CNY83 billion after offsetting the maturity of CNY391 billion reverse repos today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.8345% from 1.8376%, Wind Information showed. The overnight repo average increased to 1.7241% from 1.6298%.

YUAN: The currency weakened to 7.2756 to the dollar from 7.2851 on Tuesday. The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1773 on Wednesday, compared with 7.1776 set on Tuesday. The fixing was estimated at 7.2826 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6850%, down from Tuesday's close of 2.6975%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.16% to 3,052.37 while the CSI300 index decreased 0.24% to 3,611.07. The Hang Seng Index was down 0.58% to 17,568.46.

FROM THE PRESS: The People’s Bank of China plans to establish a bond default resolution framework and an early warning mechanism for SOE bond defaults, the PBOC said in an article on its website. The central bank will improve judiciary and administration processes and build a variety of market-based default resolution methods to promote the orderly clearing of credit risks, and enhance market resilience. Additionally, the PBOC will strengthen the regulation of secondary transactions in the bond market and improve market liquidity. (Source: PBOC Website)

China will further strengthen its connection with overseas markets, optimize the Qualified Foreign Institutional Investor (QFII) programme, and attract more overseas institutions to operate in its capital market, said Wang Jianjun, vice chairman of China Securities Regulatory Commission in a speech at the Global Financial Leaders' Investment Summit. The CSRC will implement new overseas listing regulations for mainland companies to list conveniently in Hong Kong. For Stock Connect, authorities will promote the inclusion of large-sized transactions and add a yuan trading desk option, according to Wang. (Source: Securities Daily)

China's foreign exchange reserves dropped by USD13.8 billion to USD3.1 trillion by end of October, according to the State Administration of Foreign Exchange. China, which holds USD800 billion of U.S. treasury bonds has seen a decrease in FX reserves due to a sharp fall in U.S. bond prices, said an unnamed Wall Street hedge fund manager. The 21st Century Business Herald noticed China has increased its gold reserves by 740,000 ounces to 71.2 million ounces by end-October, the 12th consecutive month of increases, to improve its FX reserve asset security.