MNI CHINA MARKETS: Yuan Stronger; Rates Lower; HK Shares Down

     BEIJING (MNI) - The Chinese yuan edged up 6.4340 against the U.S. dollar

from Tuesday's closing at 6.4366, following a higher fixing by PBOC today.  

     PBOC set yuan central parity rate at 6.4335 vs U.S. dollar on Wednesday,

stronger than Tuesday's 6.4372. Today's fixing is the strongest since Dec. 10,

2015.

***COMMENT: MNI market sources said yuan gained at a slower pace while the

dollar index halts its plunge. The market doesn't expect PBOC interventions

given no signs of intense selling behaviors. 

     Rates fell in the interbank market after the PBOC injected net CNY100

billion by open-market operation. 

- 7-day repo average last at 2.7931%, lower than 2.8978% yesterday 

- Overnight repo average 2.7113%, lower than 2.7955% yesterday. 

     ***COMMENT: MNI market sources said liquidity in the interbank market is

tighter given businesses are paying for annual taxes and banks are making

reserve payments. Although PBOC said in its daily OMO announcements that it had

made contingent reserve arrangement (CRA), liquidity remains inadequate due to

increasing cash demand approaching the Chinese New Year holidays next month .

     Yield on 10-year China government bonds last traded 3.9500%, down from

3.9550% close yesterday: Wind Information

     ***COMMENT: A series of regulatory rules introduced this year, including

restrictions on interbank transactions, has largely discouraged the market. The

demand for the bonds is declining.

     - Shanghai Composite Index finished the morning trading session little

changed at 3,436.66

- Hong Kong's Hang Seng Index fell 0.59% to 31,715.06.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

[TOPICS: M$A$$$,M$Q$$$,M$$FI$,MN$FI$,MN$FX$]