China money rates hit 21-month high on holiday demand, policy tightening worries By Reuters


© Reuters. Headquarters of the PBOC, the central financial institution, is pictured in Beijing

SHANGHAI (Reuters) – China’s short-term money rates prolonged rallies to over 21-month highs on Wednesday as buyers frightened that policymakers could also be beginning to shift to a tighter stance to chill positive aspects in share costs and property markets.

Unlike the previous few years, the central financial institution has not been making web liquidity injections into the banking system to fulfill robust demand for money heading into the lengthy Lunar New Year holiday. In truth, it has been draining funds, catching merchants unexpectedly.

The holiday begins on Feb. 11 this 12 months.

On Wednesday, the volume-weighted common charge of China’s benchmark in a single day repurchase agreements, or repo, traded within the interbank market climbed to 2.976% by late morning, up 20.14 foundation factors on the day and the very best degree since April 17, 2019.

The seven-day repo jumped to six.0%, it highest since June 27, 2018.

China’s main inventory indexes had surged greater than 4% this month earlier than pulling again in the previous few days.

“Cash conditions are very tight today,” mentioned a dealer at a international financial institution.

“Investors have given up on hopes for high-profile liquidity support before Lunar New Year.”

The People’s Bank of China (PBOC) injected 180 billion yuan ($27.86 billion) by way of open market operations earlier within the session, in distinction to a minimal every day 2 billon yuan in earlier classes, however nonetheless withdrew 100 billion yuan on a web foundation as 280 billion yuan was set to run out.

The PBOC mentioned the injection was meant to “keep banking system liquidity reasonably ample” as fiscal expenditure elevated considerably in the direction of the month-end. [CN/MMT]

A second dealer at a Chinese financial institution mentioned the PBOC’s strikes steered regulators had been eager to cut back leverage within the monetary markets as many buyers had guess on comparatively free financial circumstances earlier than the holiday.

PBOC adviser Ma Jun mentioned this week that dangers of asset bubbles will stay if China does not make applicable shifts in its financial policy stance amid current fast-growing leverage.

“It’s the precursor that China’s central bank is starting to normalise its monetary policy,” mentioned Marco Sun, chief monetary market analyst at MUFG Bank.

Other economists additionally warned that the central financial institution would step by step shift its policy stance this 12 months after huge emergency measures to cushion the shock from the coronavirus pandemic in 2020.

“Monetary policy in 2021 will be a gradual normalisation contingent on COVID-19,” mentioned Lu Ting, chief China economist at Nomura.

“With the reimposition of lockdowns and travel bans due to the most recent wave of the COVID-19, we think the PBOC will slow its normalisation at the margin.”

However, the state-run Securities Times in a front-page commentary urged buyers to not over-exaggerate the influence of the central financial institution’s short-term liquidity operations on inventory and bond markets.

It anticipated the PBOC to renew 14-day reverse repo and conduct medium-term lending facility (MLF) operations to extend liquidity and push down funding prices to extra affordable ranges.

Disclaimer: Fusion Media wish to remind you that the info contained on this web site will not be essentially real-time nor correct. All CFDs (shares, indexes, futures) and Forex costs should not offered by exchanges however fairly by market makers, and so costs might not be correct and should differ from the precise market value, which means costs are indicative and never applicable for buying and selling functions. Therefore Fusion Media doesn`t bear any duty for any buying and selling losses you would possibly incur on account of utilizing this information.

Fusion Media or anybody concerned with Fusion Media won’t settle for any legal responsibility for loss or injury on account of reliance on the data together with information, quotes, charts and purchase/promote alerts contained inside this web site. Please be totally knowledgeable concerning the dangers and prices related to buying and selling the monetary markets, it is likely one of the riskiest funding types attainable.

Source hyperlink


It’s nice to meet you.

Sign up to receive awesome content in your inbox, every week.

We don’t spam! Read our privacy policy for more info.