MNI China Press Digest Sep 23: PBOC, Sino-U.S., Swap Connect

Highlights from Chinese press reports on Tuesday:

• There remains room for a policy interest rate cut and a lower Loan Prime Rate this year, given the need to boost domestic demand and support the property sector, said Wang Qing, analyst at Golden Credit Rating, after September’s LPR was left unchanged on Monday. The People’s Bank of China could guide the five-year LPR lower in Q4 to drive down mortgage rates, Wang estimated. However, Dong Ximiao, chief researcher at Merchants Union Consumer Finance, argued that cutting the reserve requirement ratio would be preferable to interest rate reductions, noting that a sharp fall in the LPR would pressure banks’ net interest margins at a time when scope to reduce deposit rates is limited. (Source: Shanghai Securities News)
• Chinese Vice Premier He Lifeng said on Monday he hopes the U.S. and China will communicate candidly, enhance trust and resolve doubts in accordance with the principles of mutual respect, peaceful coexistence and win-win cooperation, so to promote the stable, sound and sustainable development of bilateral economic and trade ties. He made the comment in talks with a visiting U.S. congressional delegation in Beijing. The phone conversation between the two heads of state last week provided strategic guidance for the stable development of bilateral ties in the next stage, He added. (Source: Xinhua News Agency)
• Hong Kong Exchanges and Clearing Limited (HKEX) announced Monday the addition of the one-year Loan Prime Rate into the floating reference rate options under Northbound Swap Connect, the latest in a series of initiatives to expand the scheme, Securities Daily reported. A total of 31 onshore and offshore institutions conducted 53 transactions of one-year LPR referenced interest rate swaps, with an aggregate nominal value of CNY6.46 billion. This will provide more tools for international investors to manage the interest rate risk of their yuan-denominated portfolio, the newspaper said.