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MNI SURVEY: Liquidity tightened in China's interbank market in October,
with tax payments and control of conditions by the People's Bank of China (PBOC)
all pressuring, the latest MNI China Liquidity Survey showed. MNI's Liquidity
Conditions Index rose to 66.7 in October from 57.1 in September, indicating
moderately tighter conditions than in the previous month, with 9-in-10
respondents reporting liquidity the same or tighter. The higher the index, the
tighter liquidity appears to market participants.
LIQUIDITY: PBOC skipped open market operations for the third day, draining
net CNY200 billion due to maturing reverse repos, according to Wind Information.
The increased fiscal spending near month-end can offset the maturity of reverse
repos and ensure reasonable and ample liquidity, PBOC said.
RATES: The seven-day weighted average interbank repo rate for depository
institutions (DR007) increased to 2.6914% from Tuesday's close of 2.6765%, Wind
Information showed. The overnight repo average fell to 2.3000% from Tuesday's
YUAN: The yuan strengthened to 7.0584 against the dollar from Tuesday's
close of 7.0637. PBOC set the dollar-yuan central parity rate firmer at 7.0582,
strongest since Aug 26. It was 7.0617 on previous day.
YUAN: The yuan may rise against the U.S. dollar till mid-2020, supported by
its economy, the China Securities Journal reported citing Yang Weixiao, the
chief analyst at BOC International. Prices of industrial products are expected
to rebound, increasing corporate profits and returns on capital, thereby
propping up the yuan, the newspaper cited Yang as saying. China's economic
growth will stabilize in Q4, compared to the U.S.'s increased downward pressure,
which could weaken the dollar while boosting the yuan, the newspaper said citing
Bian Quanshui, chief analysts at Sinolink Securities.
BONDS: The yield on 10-year China Government Bonds was last at 3.3125%, up
from the close of 3.3000% on Tuesday, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.50% to 2,939.32, with
poultry and automotive shares leading the drop, while chip stocks rose by the
daily trading limit. Hong Kong's Hang Seng Index decreased 0.44% to 26,667.71.
FROM THE PRESS: The Export-Import Bank of China will grant CNY300 billion
in special funds to support Chinese companies importing products and services
concerning high-end equipment, smart manufacturing and energy, the China
National Radio reported. This can also promote the cross-border settlement of
the yuan, the radio said.
China plans to let infrastructure-backed so-called special-purpose local
government bonds be used in public-private partnership (PPP) projects, China
Securities Journal reported citing the Ministry of Finance. The use of these
bonds helps boost insufficient government investment funds, while PPPs can
better manage the spending. Such combination will ease fiscal pressure, and
increase the efficiency of fiscal management, the newspaper said citing Jiao
Xiaoping, director of the China Public Private Partnerships Center.
China has cut total CNY1.78 trillion taxes and fees in the first three
quarters, The Beijing News reported citing the State Taxation Administration.
The amount included CNY1.51 billion tax cuts and CNY272.5 billion of reductions
on companies contribution to social security premiums, the newspaper said.
China's loan prime rate (LPR) could be lowered by 50 to 114 bps in the next
year, if banks can turn funds in excess of the required loan loss provisions to
profits, said Ming Ming, chief analyst at CITIC Securities in a report. Chinese
banks are required to keep their loan loss provisions, which are set aside for
bad loans, at around 150%, and those with a rate which is double this
requirement are suspected of hiding profits.
China will focus on promoting the integration of blockchain and industrial
internet to accelerate the digital transformation of the manufacturing sector,
the People's Daily reported citing the Ministry of Industry and Information
Technology. China should also combine blockchain with big data to explore new
digital economy model, the newspaper cited the ministry as saying.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: firstname.lastname@example.org
--MNI Beijing Bureau; +86 10 8532 5998; email: email@example.com