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Trend Signals Remain Bearish


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MNI (London)

POLICY: China's potential economic growth rate is still seen in the 5-6% range, with conditions to implement normal monetary policies, wrote Yi Gang, governor of the People's Bank of China in an article published by a PBOC-run magazine Journal of Financial Research. The country will extend the time for normal monetary policy as long as possible, and there is no need to implement asset purchase operations at this time, Yi added. In the article, Yi also noted that the yield curve can also maintain a normal, upward shape.

LIQUIDITY: The PBOC injected CNY100 billion via 14-day reverse repos with the rate unchanged at 2.35% on Tuesday. The operations lead to a net injection of CNY100 billion as no reverse repos maturing today, according to Wind Information. The operation aims to keep liquidity stable by the end of the quarter, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.1889% from the close of 1.9232% on Monday, Wind Information showed. The overnight repo average rose to 1.9107% from the previous 1.7235%.

YUAN: The currency strengthened to 6.4592 against the dollar from Monday's close of 6.4614. The PBOC set the dollar-yuan central parity rate lower at 6.4608, compared with the 6.4695 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8750%, flat from the close of Monday, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.54% to 3,602.22, while the CSI300 index edged up 0.13% to 4,883.83. The Hong Kong's Hang Seng Index rallied 1.20% to 24,500.39.

FROM THE PRESS: China should increase the intensity of its proactive fiscal policy support by stimulating effective investment demand especially boosting infrastructure investment growth, so to stabilize the economic growth in Q4 and next year, the China Securities Journal reported citing analysts. The monthly growth rate of real estate investment dropped to nearly zero in August, while exports may slow with the end of the U.S. large-scale fiscal stimulus and improved overseas pandemics, the newspaper said citing CICC Chief Analyst Chen Jianheng. The Chinese government should speed up fiscal spending, especially the issuance and use of local government special bonds to accelerate the construction of major projects, and next year's quota of such infrastructure-back special bonds should also be partly front-loaded, the newspaper said citing Wang Yiming, a member of the Monetary Policy Committee of the People's Bank of China.

China may not further tighten its housing policies, with some local governments may even marginally relax restrictions given that the cooling housing market has placed developers in financial trouble and raised concerns about increasing risks, the Securities Times reported citing analysts. The government is expected to release some loosening on home sales around November, so to stabilize the operation of developers, as it should still guard against the possibility of further cooldown of the market in Q4, the newspaper said citing Yan Yuejin, research director at E-House Research Institute. Housing hotspots will continue with purchasing limits, while cities that saw falling home prices may welcome some policy boost, as some local governments including Guilin and Shenyang have recently moved to strictly control large home price cuts, the newspaper said citing analysts.

Chinese authorities should avoid taking the extreme measure of forcibly cutting electricity supply to achieving unrealistic emission-reduction goals while sacrificing businesses' normal operations, which can hurt the hard earned economic recovery, the Economic Daily said in an editorial. The forced electricity outage in China's many regions including the Northeast highlighted the difficulty of choosing meeting its carbon-neutral goals and energy-powered economic growth, the newspaper said. The government should use consistent and predictable policies to curb excess consumption and pollution while striving to meet businesses' energy needs, it said.

MNI London Bureau | +44 203-586-2225 |
MNI London Bureau | +44 203-586-2225 |