MNI China Daily Summary: Monday, November 17

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY283 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY163.1 billion after offsetting maturities of CNY119.9 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.5236% from 1.4673%, Wind Information showed. The overnight repo average increased to 1.5119% from 1.3729%. 

YUAN: The currency weakened to 7.1048 against the dollar from the previous 7.1007. The PBOC set the dollar-yuan central parity rate lower at 7.0816, compared with 7.0825 set on Friday. The fixing was estimated at 7.0976 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7750%, down from the previous close of 1.7800%, according to Wind Information. 

STOCKS: The Shanghai Composite Index edged down 0.46% to 3,972.03, while the CSI300 index decreased 0.65% to 4,598.05. The Hang Seng Index fell 0.71% to 26,384.28. 

FROM THE PRESS: China’s export outlook faces medium- to long-term uncertainty as trade diversion and persistent declines in export prices may heighten foreign protectionist pressures, according to Guan Tao, former senior official at the State Administration of Foreign Exchange. Guan observed that China’s recent growth in exports to Asia-Pacific nations, used to offset U.S. tariffs, has been driven largely by intermediate goods, which are ultimately incorporated into final products destined for developed markets. As a result, these flows remain sensitive to trade policies in the EU and the U.S. He also noted that the euro’s real effective exchange rate rose 5.4% this year, enhancing the price competitiveness of Chinese goods, a matter which could fuel protectionist sentiment.

Banks have stepped up the direct sales of real estate as the market downturn has led to collateralised properties being repossessed and placed into auction channels, industry insiders told Yicai. Repayment or loan renewal has become increasingly difficult as property prices fell below loan value, creating gaps that many borrowers are unable to cover, Yicai reported. On JD.com and Alibaba’s asset auction platforms, listings from some banks now exceed 1,000 units, with disposal activity accelerating markedly, Yicai said. Assessing the impact on the banking sector, Liu Chengxiang, chief banking analyst at Kaiyuan Securities, said real estate-related risks in first- and second-tier cities appear largely manageable, though asset quality for some regional commercial banks requires close monitoring.

China has issued CNY979.4 billion in dim-sum bonds so far this year, a continuation of the strong expansion that began in 2022, Securities Daily reported. According to Ming Ming, chief economist at CITIC Securities, issuance has been underpinned by the internationalisation of the yuan, the growing offshore renminbi liquidity pool and mainland enterprises’ increasing need to diversify financing channels. Looking ahead, authorities could further expand the dim-sum market by strengthening market infrastructure, improvements to bond-trading platforms and cuts to transaction costs, Ming Ming said. He added that tax incentives could also boost participation from offshore investors. Dim-sum bonds are offshore yuan-denominated bonds issued outside mainland China.