MNI China Daily Summary: Tuesday, November 18

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY407.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY3.7 billion after offsetting maturities of CNY403.8 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.5239% from 1.5236%, Wind Information showed. The overnight repo average rose to 1.5285% from 1.5119%.

YUAN: The currency weakened to 7.1125 against the dollar from the previous 7.1048. The PBOC set the dollar-yuan central parity rate higher at 7.0856, compared with 7.0816 set on Monday. The fixing was estimated at 7.1114 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7798%, up from the previous close of 1.7753%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index fell by 0.81% to 3,939.81, while the CSI300 index was down 0.65% at 4,568.19. The Hang Seng Index dropped 1.72% at 25,930.03.

FROM THE PRESS: Active capital-market trading this year has significantly boosted tax revenue in related industries, Securities Daily reports, with equity transfers and increased dividend pay-outs supporting personal income tax revenue. According to Ministry of Finance data, stamp tax on securities transactions reached CNY162.9 billion in the first 10 months, representing an 88.1% year-on-year increase. In the same period, national tax revenue reached about CNY15.34 trillion, up 1.7%. Securities Daily noted that weakness in the producer price index (PPI) has weighed on tax-revenue growth, given that the data is calculated at current prices.

The PBOC’s October financial statistics report showed that household and corporate deposits declined by CNY1.34 trillion and CNY1.09 trillion, while non-bank deposits increased by CNY1.85 trillion, Yicai reports. Many market participants said this shows the strong stock-market performance has prompted households to shift deposits into equities. However, several authoritative industry experts interviewed by Yicai argued that when households, companies and non-bank institutions use deposits to buy or sell stocks, this merely redistributes deposits and equities among different entities, leaving the overall volume of deposits largely unchanged. An industry expert noted that when deposit rates fall, investors may favour wealth-management or asset-management products, with most of these funds still to circulate back into bank-related instruments such as negotiable certificates of deposit or bonds, ultimately reappearing as interbank deposits or deposits held by operating entities.

China’s foreign-exchange market remained broadly balanced in October, according to State Administration of Foreign Exchange spokesperson Li Bin. Banks recorded a settlement-and-sales surplus of USD17.7 billion during the month, a decrease from September but broadly consistent with the average levels during the first nine months, Li noted. He added that while September experienced a modest net capital outflow from non-bank sectors due to the National Day and Mid-Autumn holidays, net capital inflows increased in October. Taken together, the two months produced an average monthly net cross-border inflow of USD24 billion.