MNI China Daily Summary: Wednesday, November 20
EXCLUSIVE: The People’ s Bank of China is likely to expand the recently introduced outright reverse repo tool, up its bond trades and make further cuts to the reserve requirement ratio later this year as it prepares to offset any potential liquidity shock driven by increased local government special bond issuance, policy advisors and traders told MNI.
POLICY: China's Loan Prime Rate remained unchanged according to a PBOC statement, in line with expectation and as the central bank held its key 7-day reverse repo rate stable.
POLICY: Chinese aluminium exporters will attempt to renegotiate higher prices with buyers following the government's decision to cancel a 13% tax rebate on overseas shipments, Shanghai Metals Market analysts said, calculating the move will add CNY2,859 per tonne to exporters costs.
LIQUIDITY: The PBOC conducted CNY302.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY69.1 billion after offsetting the maturity of CNY233 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.7259% from 1.7299%, Wind Information showed. The overnight repo average decreased to 1.4752% from 1.4907%.
YUAN: The currency weakened to 7.2422 to the dollar from 7.2399 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 7.1935, compared with 7.1911 set on Tuesday.
BONDS: The yield on 10-year China Government Bonds was last at 2.0200%, up from Tuesday's close of 2.0150, according to Wind Information.
STOCKS: The Shanghai Composite Index increased 0.66% to 3,367.99, while the CSI300 index rose 0.22% to 3,985.77. The Hang Seng Index edged up 0.21% at 19,705.01.
FROM THE PRESS: China’s top securities watchdog will improve the efficiency of overseas listings and actively support qualified domestic firms to go public abroad, Shanghai Securities News reported, citing Wu Qing, chairman of the China Securities Regulatory Commission. The CSRC will expand the scope of Stock Connect and develop depositary receipts to attract global medium- and long-term funds, said Wu. The Commission will also steadily open up commodity and financial-futures markets to meet the needs of diversified investment and risk management better, Wu added.
China’s high-frequency data suggests consumption will remain strong in November and December, according to Shen Jianguang, chief economist at JD Group, who highlighted 567,000 vehicles were sold between November 1-10, up 29% y/y, of which new energy vehicles increased by 70% y/y. Home-appliance sales are expected to benefit from new-home total square metre transactions in 30 large and medium-sized cities rising 7.3% between November 1 to 17, Shen added. However, authorities need measures to increase residents’ income to ensure a sustained consumption rebound, Shen continued.
Shenzhen has become the third tier-one city to cancel taxation distinctions between ordinary and non-ordinary housing categories, following Beijing and Shanghai, National Business Daily reported. Deed tax for first and second family homes below 140 square metres will be reduced to 1%, and exemptions given on value-added tax after two years of ownership versus 5% for those selling within two years. The move will benefit second-hand housing sales and the roughly 30% of Beijing properties classified as non-ordinary housing, which means villas and high-end apartments, the newspaper explained.