MNI China Daily Summary: Friday, November 25

LIQUIDITY: The People's Bank of China (PBOC) injected CNY8 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net drain of CNY13 billion after offsetting the maturity of CNY21 billion reverse repos 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) decreased to 1.7323% from 1.7394% on Thursday, Wind Information showed. The overnight repo average fell to 1.0247% from the previous 1.0445%.

YUAN: The currency weakened to 7.1615 against the dollar from 7.1486 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 7.1339, compared with 7.1201 set on Thursday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8375%, up from Thursday's close of 2.8050%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.40% to 3,101.69 while the CSI300 index gained 0.50% to 3,775.78. The Hang Seng Index fell 0.49% to 17,573.58.

FROM THE PRESS: The urgent need to cut banks’ reserve requirement ratio is rising as China should move to stabilise growth in Q4, which is the biggest contributor to yearly growth, China Securities Journal reported on its front page. A 25-50 bp cut to release CNY500 billion to CNY1 trillion in medium and long-term funds can be expected, the newspaper said citing CICC analyst Lin Yingqi. A RRR cut will send an easing signal and reduce banks’ capital costs, which may drive down banks’ December quotations on the 5-year Loan Prime Rate that they price mortgages on, the newspaper said citing analysts. Residential loan growth remains sluggish, with the property sector set to become an important destination for banks’ credit, the newspaper cited analysts as saying.

The yuan remains stable despite expectations the PBOC will cut banks’ reserve requirement ratio in coming days, The 21st Century Business Herald reported, citing CITIC Securities chief economist Ming Ming. He said a U.S. dollar rebound will not cause the yuan to break through its previous low due to the improving domestic economy, slowing capital outflows, and the backlog of year-end foreign exchange settlements. The article cited traders noting that the China-US interest rate differential is narrowing, giving no strong support to short the yuan even as the expected RRR will see a divergence in monetary policy between China and the US.

Large state-owned banks reached cooperation agreements with property developers to provide credit, following this week's joint pledge by top regulators to increase financial support for the sector, reported financial news agency Cls.cn. As of Thursday, six major state-owned banks agreed to provide credit lines totalling CNY1.275 trillion to 17 developers, with Industrial and Commercial Bank of China lending to 12 of them, Cls.cn said.