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LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. The operation left liquidity unchanged given it netted off CNY10 billion reverse repos maturing 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) increased to 2.3580% from the close of 2.2808% on Monday, Wind Information showed. The overnight repo average rose to 2.3118% from the previous 2.2524%.
YUAN: The currency weakened to 6.4733 against the dollar from Monday's close of 6.4705. The PBOC set the dollar-yuan central parity rate higher for a sixth day at 6.4613, compared with the 6.4546 set on Monday, marking the weakest fixing since May 7.
BONDS: The yield on 10-year China Government Bonds was last at 3.1150%, down from Monday's close of 3.1175%, according to Wind Information.
STOCKS: The Shanghai Composite Index rose 0.80% to 3,557.41, while the CSI300 index gained 0.62% to 5,122.16. The Hong Kong's Hang Seng Index edged down 063% to 28,309.76.
FROM THE PRESS: The PBOC on Monday summoned major state-owned banks and payment firms including China Construction Bank and Alibaba Group's Alipay to order harder crackdowns on cryptocurrency trading, according to a statement on its website. The central bank urged institutions at the meeting to launch thorough checks on clients' accounts to identify those involved in trading cryptocurrencies and promptly cut their payment channels. Institutions are banned from providing crypto-related products or services, including account opening and clearing, the PBOC said. The statement came soon after the government intensified a crackdown on cryptocurrency mining in several provinces.
China is likely to keep liquidity level appropriate and policies stable, and the market needs not to be concerned even as the pace of credit expansion has slowed, the Securities Times reported citing analysts. Monetary policies will emphasize two structural aspects of extending the terms for small business loans and green finance, the newspaper said. That the central bank kept LPR unchanged for the 14th month and MLF rate the same for the 15th month showed prudent and neutral monetary stance, the newspaper said. Regulators may also judge the soaring commodity-driven PPI to be unsustained, which means that MLF isn't likely to be raised due to inflation, the newspaper said. Credit growth is likely to be maintained given a rebound in corporate bond offerings and further expansion of special-purpose local government bonds, the newspaper said.
The PBOC can enhance the public's confidence in its currency policies by awarding those who follow its guidance on the yuan and punish those who bet against it, Guan Tao, the chief economist of BOC International and a former forex regulatory official, wrote on Yicai.com. While the PBOC's previous response to excess depreciation may not fit, the same principle should be observed, Guan said without elaborating. Authorities must develop emergency response measures if an overall weakening dollar causes the yuan to move one way, Guan said. Two-way movement is likely to be observed in a better scenario, he said. No government will stand by and do nothing if the markets exhibit volatilities contrary to its wishes, Guan said citing the Federal Reserve's extraordinary easing approach.