MNI China Daily Summary: Thursday, Sept 4

EXCLUSIVE: The yuan is likely to see moderate near-term appreciation under central bank guidance and capital inflows into A-shares, though potential monetary easing in both China and the U.S. will be key factors, Chinese forex experts told MNI.

POLICY: China’s Ministry of Commerce will implement anti-circumvention measures on imports of certain single-mode optical fibre products from the United States, according to a notice from the ministry.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY212.6 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY203.5 billion after offsetting maturities of CNY416.1 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4488% from 1.4415% previously, Wind Information showed. The overnight repo average increased to 1.3149% from the previous 1.3140%.

YUAN: The currency strengthened to 7.1402 against the dollar from the previous 7.1468. The PBOC set the dollar-yuan central parity rate lower at 7.1052, compared with 7.1108 set on Wednesday. The fixing was estimated at 7.1405 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7975%, down from the previous close of 1.8050%, according to the National Interbank Funding Centre.

STOCKS: The Shanghai Composite Index fell 1.25% to 3,765.88, while the CSI300 index decreased 2.12% to 4,365.21. The Hang Seng Index dropped 1.12% to 25,058.51.

FROM THE PRESS: The Ministry of Finance and the People’s Bank of China will deepen cooperation, strengthen coordination and continue to promote the stable and healthy development of China’s bond market as well as ensure the effective implementation of fiscal and monetary policies, according to a statement on the PBOC website. The Ministry and the Bank’s Joint Working Group held its second group leaders’ meeting, and had in-depth discussions on financial market operations, government bond issuance management, central bank treasury trading operations and improving the offshore yuan-denominated treasury issuance mechanism, the statement said.

Local governments are increasingly issuing special bonds to inject capital into government investment funds to support local technology innovation, strategic emerging and future industries, 21st Century Business Herald reported. Ningbo city, Shanxi province and Shanghai city all allocated CNY5 billion from August special bond issuance for this purpose, following Beijing city’s first-ever move to issue CNY10 billion such bonds for its municipal government investment guidance fund in June, the newspaper said. There were a total CNY977.6 billion local government bonds issued in August, with new special bonds accounting for CNY486.6 billion, the newspaper added.

New home transaction areas in Shanghai rose 35% in the last week of August over the prior week, after the city scrapped the limit on the number of houses purchased outside the outer ring road and lowered borrowing costs, 21st Century Business Herald reported. The housing market is expected to heat up further as developers accelerate project marketing, while a boost in trading conditions will also lift developers’ confidence for more stable prices, the newspaper said citing analysts.