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TOP NEWS: China market's attention is on key GDP data release at 15:00
local time on Thursday, including industrial output, fixed-asset investment,
retail sales and real estate sales & investment figures.
- MNI survey indicates analysts expect a mild slowdown in the fourth quarter,
with the median estimate at +6.7% vs +6.8% in Q3. Ahead of the release, MNI
outlines '5 Things To Look For' in the GDP data that are likely to create any
TOP NEWS: China should raise savings and deposit rates asymmetrically and
interbank market liquidity will be better in 2018.Ming Ming, head of fixed
income research at CITIC Securities and a former PBOC monetary policy official,
spoke in an interview.
TOP NEWS: Profits by China's 98 major central state-owned companies (SOEs)
in 2017 increased by the most in 5 yrs.
- Central SOEs' combined profits in 2017 rose by 15.2% y/y to CNY1.42tln.
- Traditional sectors inc petrochemical, steel & coal returned to profitability
- SOEs have completed its process of reducing excess capacity in steel
production; will focus on shrinking coal capacity by 10mln tons in 2018.
- SOEs reduced overall leverage by 0.4 percentage point in 2017 y/y.
- No default on bonds by SOEs in 2017.
***TAKEAWAY: SOEs enjoys supports after President Xi Jinping called on SOEs to
be "bigger and stronger." Shen indicated SOEs won't likely cut steel production
capacity further. That may cause more friction with trading partners like the
U.S. and EU.
TOP NEWS: China's housing authorities reiterated that it would "resolutely"
enforce curbs on the property sector, and that media reports that some cities
loosened controls were misinterpretation of government measures.
- Last week, some Chinese newspapers reported cities including Lanzhou had
loosened restrictions on home purchases.
***TAKEAWAY: While China's central government keeps the tight lid on the
property market, regional authorities concerned with slowing growth will seek to
bend rules. See MNI story: China's Property Market Defies Doom Predictions
DATA: China's outbound direct investment (ODI) in non-financial sector
slumped 29.4% y/y to $120.08 billion, data by Ministry of Commerce on Tuesday
- "Unreasonable" outbound investment was effectively curbed under China's strict
controls to prevent risks that could endanger its domestic economy: ministry
- Chinese companies made 341 acquisitions in 49 countries, totaling $96.2
- FDI growth accelerated to 7.9% Y/Y to CNY877.56 billion from 4.1% in 2016. In
December, the volume decreased 9.2% to CNY73.94 billion, much lower than the
90.7% y/y reported in November.
LIQUIDITY: PBOC injected CNY100 billion in 7-day reverse repos, CNY90
billion in 14-day reverse repos, CNY10 billion in 63-day reverse repos in Open
Market Operation (OMO) on Wednesday.
- Net CNY100 billion injection after CNY100 billion reverse repos mature
- CFETS-ICAP money-market sentiment index ended at 67 on Tuesday, up from 52 on
RATES: Money market rates were lower after PBOC injected a net of CNY100
billion via its open-market operations.
- 7-day repo average was last at 2.8191%, down from Tuesday's average of
- The overnight repo average was at 2.7445% compared with Tuesday's 2.7955%.
YUAN: The yuan gained against the U.S. dollar after the People's Bank of
China set a stronger daily fixing.
- The yuan was last at 6.4387 against the U.S. unit, dropping 0.03% from the
official closing price of 6.4366 yesterday
- PBOC set yuan central parity rate vs U.S. dollar at 6.4335 on Wednesday,
stronger than Tuesday's 6.4372.
- Today's fixing is the strongest since Dec. 10, 2015.
BONDS: The yield on benchmark 10-year China government bonds was last at
3.9600%, up from the previous close of 3.9550%, according to Wind.
STOCKS: Stocks rose in Shanghai, led by financial trust shares, with Anxin
Trust & Investment Co. led the gain. The benchmark Shanghai Composite Index
closed up 0.24% at 3,444.67. Hong Kong's Hang Seng Index was down 0.11% at
FROM THE PRESS: The Chinese yuan may further appreciate, but its current
gain doesn't mean China's objective of keeping a stable exchange rate is
changing, China Securities Journal said in a commentary Wednesday.
- Yuan's gain since mid-Dec is due to the weakening of the U.S. dollar: paper
- Market expectation and investors' behaviors may accentuate the short-term
- Difficult for yuan to repeat last year's 6% gain; outlook is mixed: newspaper
***TAKEAWAY: The commentary by the official security newspaper suggests the
central bank will seek to maintain stability of the yuan and guide market
expectation to minimize high volatilities.
China regards the yuan's gain against the U.S. dollar secondary to its
stability vs a basket of currencies, PBOC's Financial News newspaper reported
citing unidentified sources.
- PBOC needs not to set limits for the minimum or maximum of the yuan exchange
rate against the U.S. dollar: newspaper citied sources
- Euro's strength contributed to the weakening of the dollar: Financial News
- Yuan's stable rise helps its internationalization.
*** TAKEAWAY: Financial News seems positive on yuan's outlook. PBOC may see a
stronger yuan could help China's desire to widen the global use of the yuan.
China banking regulators are targeting this year large financial entities
created illegally with complicated structures and irregular investment
activities, China Banking Regulatory Commission Chairman Guo Shuqing was citied
as saying by Wednesday's People's Daily.
- Stability of China's financial sector threatened by factors including bad
assets, shadowy transactions and illicit activities: Guo
- Regulators' key tasks are to strengthen risk controls, continue with
deleveraging programs targeting corporate and household debt, curb property
bubbles, and tackle the local government debt problem: Guo
***TAKEAWAY: Regulators still see great risks in the banking sector and
financial activities will remain limited by close scrutiny.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: email@example.com