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MNI China Daily Summary: Wednesday, November 30
LIQUIDITY: China’s interbank market liquidity tightened in November, despite renewed Covid concerns, as the Peoples’ Bank of China (PBOC), drained funds from the system, the latest MNI Liquidity Conditions Index shows. The Liquidity Condition Index, surged to 69.1 from 46.9 last month, with over half of respondents reporting tighter conditions, especially in the first half of the month. The index marks the highest reading of the year.
DATA: China's Purchasing Managers' Index (PMI) slid to a seven-month low of 48 in November and deeper into the contractionary zone below 50, as renewed outbreaks of Covid-19 disrupted factory activity, data from the National Bureau of Statistics showed. The decline from 49.2 in October came as the production and new orders sub-indices fell by 1.8 and 1.7 points from October to 47.8 and 46.4, respectively.
LIQUIDITY: The PBOC injected CNY170 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net injection of CNY168 billion after offsetting the maturity of CNY2 billion reverse repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.0203% from the close of 1.8788% on Tuesday, Wind Information showed. The overnight repo average increased to 1.5684% from the previous 1.0286%.
YUAN: The currency strengthened to 7.1419 against the dollar from 7.1663 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 7.1769, compared with 7.1989 set on Tuesday.
BONDS: The yield on the 10-year China Government Bond was last at 2.9160%, up from Tuesday's close of 2.8900%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged up 0.05% at 3,151.34, while the CSI300 index gained 0.12% to 3,853.04. The Hang Seng Index rallied 2.16% to 18,597.23.
FROM THE PRESS: China is accelerating the start of new infrastructure projects, with the growth in infrastructure investment expected to reach about 12% this year, Yicai.com reported citing Wang Qing, chief macro analyst with Golden Credit Rating. He estimates it could lift annual GDP by 1.2 percentage points. Project-backed new special bonds issued by local governments have risen to a record high above CNY4 trillion yuan this year, and over 60% of them have been invested in infrastructure projects, the newspaper said. The government also introduced policy bank-backed financial instrument totaling CNY739.9 billion, and all these funds have been allocated to projects. The National Development and Reform Commission urged all these projects to be started by the end of November, the newspaper said.
China’s move to lift a ban on equity refinancing for listed real estate firms will help ease developers’ cash flow pressures without increasing their debt burden, with high-quality leading private developers and state-owned developers capable of mergers and acquisitions likely to be the main beneficiaries, 21st Century Business Herald reported citing Chen Mengjie, analyst of Yuekai Securities. Private developers that received bank credit prior to the ban being lifted may continue to benefit, while those who have defaulted on debt may not be able to take advantage of the policy. The recent easing of real estate financing has boosted confidence in the industry, but a long-term recovery depends on a rebound in home sales, the newspaper said citing Chen.
China needs to ensure a strong domestic economy, improve financial supervision, and reform institutional opening-up to promote the long-term international use of the yuan, reports Shanghai Securities News citing Guan Tao, a former senior State Administration of Foreign Exchange official. The yuan is increasing its standing as a major international currency due to its market-oriented exchange rate and recent resilient performance, the paper said. The use of the yuan in global foreign exchange reserves is set to surpass sterling and the yen due to relaxed restrictions on outbound investment in the yuan bond market, the report noted, citing Michael Spencer, chief economist at Deutsche Bank Asia Pacific.
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