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POLICY: China's central bank reduced a benchmark lending rate, the one-year
Loan Prime Rate (LPR) by 5 bps to 4.15% on Wednesday and lowered the five-year
LPR also by 5 bps to 4.80%. The cuts are in line with market expectations after
the People's Bank of China (PBOC) cut the medium-term lending facility (MLF)
rate on Nov 5 and 7-day reverse repo on Monday, both also by 5bps. An MNI
exclusive yesterday, citing advisors close to policymakers, predicted the cut.
POLICY: The citation of national security for trade-related issues has been
exploited and abused and the practice increases tensions and protectionism, Alan
Wolff, a Deputy Director-General of the World Trade Organization, said today.
While Wolff didn't specify the target of his comment, the administration of
Donald Trump had frequently used the term to restrict the business of Chinese
technology companies including Huawei Technologies. European governments have
also aired concerns of Huawei's dominance in 5G industry.
LIQUIDITY: The PBOC skipped open market operations, leaving liquidity
unchanged, according to Wind Information. The level of liquidity in the banking
system is reasonable and ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository
institutions (DR007) decreased to 2.3847% from Tuesday's close 2.5747%, Wind
Information showed. The overnight repo average fell to 1.8905% from 2.3269%
YUAN: The yuan weakened to 7.0369 against the dollar from Tuesday's close
7.0238. PBOC set the dollar-yuan central parity rate weaker for a third day at
7.0118, compared with Tuesday's 7.0030.
BONDS: The yield on 10-year China Government Bonds was last at 3.1700%,
flat from the close of Tuesday, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.78% to 2,911.05. Rare
earth and gold shares rallied as investors sought less risky alternatives, while
banking, brokerage, futures and insurance stocks fell. Hong Kong's Hang Seng
Index lost 0.75% to 26,889.61.
FROM THE PRESS: The PBOC will continue to strengthen counter-cyclical
adjustment and increase credit support to the real economy as it seeks to
stabilize economic growth, PBOC governor Yi Gang said at a meeting on Tuesday,
according to a statement on its website. The central bank will also guide
lending rates lower and encourage banks to top up capital, according to the
China's housing market continues to cool and the supply of commercial
residential housing may exceed demand in 2020, the Economic Information Daily
reported citing a report by the Shanghai E-House Real Estate Research Institute.
In addition to increased inventories at third and fourth-tier cities, Beijing
also has 72,800 sets of unsold houses, the highest in eight years, the newspaper
The new five-year LPR, which was cut by 5bps to 4.80% today, may stimulate
demand for home purchases, Cailian Press reported citing Yan Yuejin, director of
the E-House Real Estate Research Institute. The five-year LPR acts as a
reference for medium and long-term loans, mainly mortgage loans. The LPR cut
helps reduce cost of home purchases, the newspaper cited Yan as saying.
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