MNI China Daily Summary: Wednesday, September 13

     TOPS NEWS: The U.S. House Foreign Affairs Committee is considering

unilateral sanctions against large Chinese banks involved with North Korea, the

South China Morning Post reported Wednesday. Large Chinese banks such as China

Merchants Bank and Agricultural Bank of China were named by committee chairman

Ed Royce as possible targets. He encouraged Chinese banks and companies to make

a choice between doing businesses with the U.S. or North Korea. The newspaper

quoted U.S. Treasury Secretary Steve Mnuchin as saying Tuesday that the U.S. may

impose more sanctions on China if it doesn't follow through on new sanctions on

North Korea. (South China Morning Post)

     TOP NEWS: As the demand for foreign exchange and the yuan becomes more

balanced, the yuan may see two-way fluctuations and the currency may also

appreciate, the China Securities Journal reported Wednesday. The yuan ended 11

consecutive days of rises on Tuesday. The PBOC's recent policy decision to

remove risk provisions for currency-forward contracts reduces companies' costs

for purchasing foreign exchange and is beneficial for liquidity stability in the

offshore yuan, the newspaper said, quoting analysts. Government regulators may

worry that a stronger yuan could curb export growth, and the PBOC's new policy

signals to some degree that it isn't hoping for a one-way strengthening of the

yuan. The yuan may fall in the short term and two-way fluctuations are likely,

and its outlook depends largely on the dollar index, the report said. (China

Securities Journal)

     POLICY: The Chinese government's new campaign to bolster the country's

rental housing market to help satisfy growing urban housing demand and take some

pressure off home purchase prices could have a large impact in the longer term

as the market develops, but will have only limited impact in the near term,

property market analysts and experts told MNI. Nevertheless, Huang Shi, chief

property analyst at Founder Securities, said the new policies are expected to

slightly enhance investment and new construction in the property sector in the

short term but reduce housing sales momentum over the next two years.

     RATES: Money market rates were mixed on Wednesday after the PBOC injected a

net CNY70 billion via open-market operations. The seven-day repo average was

last at 2.8194%, down from Tuesday's average of 2.8734%. The overnight repo

average was at 2.6296% compared with Tuesday's 2.6220%.

     YUAN: The yuan rose against the U.S. dollar Wednesday after the People's

Bank of China set a weaker daily fixing. The yuan was last at 6.5286 against the

U.S. unit, rising 0.10% compared with the official closing price of 6.5350 on

Tuesday. The People's Bank of China set the yuan central parity rate against the

U.S. dollar at 6.5382 Wednesday, modestly weaker than Tuesday's 6.5277.

     BONDS: The yield on benchmark 10-year China government bonds was last at

3.6077%, up from the previous close of 3.5825%, according to Wind, a financial

data provider.

     STOCKS: Stocks rose, led higher by the ceramics and non-ferrous metal

sectors. The benchmark Shanghai Composite Index close up 0.14% at 3,384.15. Hong

Kong's Hang Seng Index was 0.25% lower at 27,901.84. 

     FROM THE PRESS: There has been CNY3.35 trillion in local-government debt

issued this year as of Tuesday, the China Securities Journal reported Wednesday.

The effect of local-government-debt issuance on market supply and liquidity will

weaken in the coming months, it said, with about CNY1.5 trillion expected to be

issued in the second half of the year -- or about CNY430 billion every month.

Therefore, pressure to issue local-government debt will be relatively

controllable. This pressure will be reduced in 2018 because the

local-government-debt swap quota is CNY1 trillion-CNY1.5 trillion, the report

said. (China Securities Journal)

     China's first real-estate investment trust products for individual

investors may soon be available after a long wait, the Economic Information

Daily said in a front-page report Wednesday. The China Securities Regulatory

Commission is speeding up studies and regulations and rules, the newspaper said.

REITS offered by companies with rental-housing assets are expected to be

encouraged as China tries to bolster the rental market. This will be a new era

for REITS in China -- until now it has mainly only been financial institutions

that have had access to REITS, the report said. (Economic Information Daily)

     The yuan exchange rate will be more flexible and its formation mechanism

will continue to be based on the market's supply and demand, Lu Lei, deputy

director of the State Administration of Foreign Exchange, said at a forum

entitled "Renminbi and the Foreign Exchange Market" in Beijing on Wednesday,

according to report in the Economic Daily. Lu argued that China's financial

market is in transition and needs to further open up, and that its rules do not

completely dovetail with those of the international market, and so arbitrage

occurs in different situations. The "herd behavior" seen in China's financial

markets would be reduced if more market participants from both China and foreign

countries could engage in China's bond and currency markets, Lu noted. Investors

in onshore and offshore markets should be the same in the future in a bid to

avoid the obvious price spreads of the two markets, which trigger much of the

arbitrage, Lu said. (Economic Daily)

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]