MNI China Daily Summary: Wednesday, November 27

     POLICY: China has pre-allocated CNY1 trillion of next year's

special-purpose bond quotas to local governments, the Ministry of Finance said

on its website Wednesday, confirming what has largely been known to the market.

Local governments should now ensure that these bonds have an impact boosting the

economy as 2020 gets underway, the ministry said.

     LIQUIDITY: Liquidity conditions improved markedly in November as the

People's Bank of China (PBOC) moved to help a slowing economy, the latest MNI

China Liquidity Survey showed. MNI's Liquidity Conditions Index fell sharply in

November, dropping to 12.5 from 66.7 in October, with 83.3% of the respondents

reporting an improved situation. It was the lowest reading since June and the

second lowest this year. The higher the index reading, the tighter liquidity

appears to market participants.

     DATA: Total profits made by China's largest industrial companies in October

fell 9.9% y/y, steeper than 5.3% drop in September, due to the declining

ex-factory prices of industrial products and slowing sales, according to a

statement by the National Bureau of Statistics (NBS) on Wednesday. It was the

steepest drop since 14.0% reduction recorded in January and February, NBS data

show.

     LIQUIDITY: The PBOC skipped open market operations for the sixth day,

leaving liquidity unchanged as no reverse repos are due today, according to Wind

Information. The total liquidity in the banking system is reasonable and ample,

the PBOC said.

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

institutions (DR007) decreased to 2.5081% from Tuesday's close 2.5595%, Wind

Information showed. The overnight repo average fell to 2.2229% from 2.3078%

yesterday.

     YUAN: The yuan strengthened to 7.0260 against the dollar from Tuesday's

close 7.0363. PBOC set the dollar-yuan central parity rate higher at 7.0349,

compared with Tuesday's 7.0344.

     BONDS: The yield on 10-year China Government Bonds was last at 3.1775%, up

from Tuesday's close of 3.1750%, according to Wind Information. 

     STOCKS: The Shanghai Composite Index trimmed 0.13% to 2,903.19, with home

appliance shares leading the drop. Hong Kong's Hang Seng Index increased 0.12%

to 26,946.55.

     FROM THE PRESS: The PBOC may not conduct OMO until December, China

Securities Journal reported citing analysts. Liquidity will continue to be

adequate given  increased fiscal spending expected , the newspaper said.

     More medium and small banks in China are expected to issue perpetual bonds

as the central bank pushes them to recapitalize, the Shanghai Securities News

reported. Two regional banks - Huishang Bank and Taizhou Bank - have been

approved to issue bonds to replenish capital, the newspaper 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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