There has been growing speculation............>

CHINA: There has been growing speculation surrounding the potential for the PBoC

to cut the rate that it applies to its MLF operations, with the next opportunity

being presented by the CNY265bn 1-Year worth of MLF maturing today.

- Such a move would have knock on effects for the Loan Prime Rate (LPR),

although the LPR could of course be fixed lower without a reduction in the rate

applied to the MLF, a move that could be facilitated by the recent, broad

reduction in the RRR.

- MNI recently noted that the PBoC is likely to guide the LPR lower this week

(when it is fixed on Friday), but it may hold its MLF rate steady, leaving

itself ammunition for further stimulus if necessary. This was based on our

conversations with Chinese government advisors.

- The PBoC didn't rollover the previous round of maturing MLF last week, as it

was perhaps wary of how the market would perceive such a move on the back off

the latest reserve requirement ratio cut.

- Current rate applied to 1-Year MLF: 3.30%.