MNI China Daily Summary: Wednesday, October 26

LIQUIDITY: Liquidity conditions across China’s interbank market eased in October, as end-quarter Macro Prudential Assessment (MPA) stress and Golden week cash needs fell away. The outlook for the economy picked up, helped by the mood music from the 20th Party Congress, the latest MNI liquidity conditions survey showed. The Liquidity Condition Index, slid to 46.9 from September’s 59.4, with one quarter of the participants reporting a marginal loosening of liquidity conditions.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY280 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net injection of CNY278 billion after offsetting the maturity of CNY2 billion reverse repos today, according to Wind Information. The operation aims to offset the impact of tax season and government bond issuance, and keep month-end liquidity stable, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.0226% from the close of 1.9195% on Tuesday, Wind Information showed. The overnight repo average decreased to 1.7761% from the previous 1.7899%.

YUAN: The currency strengthened to 7.1825 against the dollar from 7.3085 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 7.1638, compared with 7.1668 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.7020%, down from Tuesday's close of 2.7300%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.78% at 2,999.50, while the CSI300 index gained 0.81% to 3,656.90. The Hang Seng Index rose 1.00% to 15,317.67.

FROM THE PRESS: The PBOC and the State Administration of Foreign Exchange said they will strengthen departmental collaboration to maintain the healthy development of the stock, bond and property market, and stabilise the yuan at a reasonable and balanced level, according to a statement on the PBOC website late Tuesday. The China Banking and Insurance Regulatory Commission said on its website on Tuesday that financial risks are generally restrained and the financial system is generally stable, and the capital market has long-term investment value. The China Securities Regulatory Commission called for increased confidence in the sound development of China’s economy in the long run, according to a statement on its website.

China will support qualified foreign-funded enterprises to raise funds by listing on the Main Board, the Science and Technology Innovation Board, the ChiNext Board, the Beijing Stock Exchange, as well as issuing corporate bonds, Caixin reported, citing a document released by the National Development and Reform Commission and five other departments late Tuesday. There is no legal obstacle to their listing in China as only a few among the 168 listed foreign-funded companies are directly controlled by foreign institutions, Caixin reported. The new rules seek to expand the inflow of foreign capital and stabilise the scale of foreign investment, Caixin added.

The PBOC has increased net injections of liquidity by lifting reverse repos to more than CNY200 billion a day to cushion the impact of the traditional tax season and government bond issuance, the China Securities Journal reported. Tax payments will drain liquidity mainly on Wednesday and Thursday, though liquidity will gradually become looser in early November, the newspaper said citing analysts. The PBOC is expected to keep using open market operations and structural monetary policy tools to maintain reasonably ample liquidity through the end of the year, the newspaper said citing analysts.