MNI China Daily Summary: Tuesday, December 13

LIQUIDITY: The People's Bank of China (PBOC) injected CNY2 billion via 7-day reverse repos with the rate unchanged at 2.0%. This keeps liquidity unchanged after offsetting the maturity of CNY2 billion repos today. 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) increased to 1.6994% from the close of 1.5776% on Monday, Wind Information showed. The overnight repo average edged down to 1.0406% from the previous 1.0444%.

YUAN: The currency weakened to 6.9811 against the U.S. dollar from the previous close of 6.9757. The PBOC set the dollar-yuan central parity rate higher at 6.9746, compared with 6.9565 set on Monday.

BONDS: The yield on the 10-year China Government Bond was last at 2.9175%, up from Monday's close of 2.9125%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.09% to 3,176.33, while the CSI300 index fell 0.20% to 3,945.68. Hong Kong's Hang Seng Index gained 0.68% to 19,596.20.

FROM THE PRESS: M2 money supply growth quickened in November due to stable economic growth, an acceleration of credit delivery to the real economy, and a decrease in fiscal deposits of 368.1 billion yuan, according to the Securities Daily. The balance of broad money (M2) increased by 12.4% year-on-year in November. Commercial banks continued to increase medium to long term loans as measures to support the real estate sector helped increase confidence, and the issuance of special bonds accelerated in October. With more growth policies ahead, authorities need to continue to promote credit expansion into key areas such as infrastructure, manufacturing and real estate, to help the economy grow at a reasonable level, the newspaper said.

Regulators need to accelerate the introduction of financial derivatives to offer more risk hedging tools and improve policy transparency to dispel concerns about China’s opening up, and in order to attract foreign investors to increase their holdings of yuan bonds, 21st Century Business Herald reported. Overseas investors have increased holdings of yuan bonds since September as China-U.S. interest spreads have narrowed and worries about recession in Europe and the U.S. have increased. Regulators clarified capital management requirements for foreign institutional investors investing in China's bond market in mid-November, boosting market confidence as investors feel yuan bond trading rules are further aligned with international practices, the newspaper said citing industry insiders.

The recent deepening of China and Saudi Arabia relations presents an opportunity to develop the petro-yuan, according to Yicai.com. The need for an alternative to petro-dollars has increased following sanctions imposed on Russia and many countries have been seeking alternatives for many years, the newspaper reported. China should promote the petro-yuan by opening up its futures market and increasing the scale of offshore yuan asset pools. The development of the petro-yuan would be an important catalyst for the internationalisation of the yuan, the paper said.