PBoC Bonds to Soak Liquidity

123jump.com Staff
22 Feb, 2008
New York City

Asian stocks fell sharply as U.S. recession evidence mounted. Asian markets fearful of slump in exports from the region, decline in foreign direct investment from the U.S., and rising inflation. A sharp and sustained rise in energy and commodities prices such as copper, zinc, aluminum, and steel has put investors on the defensive. India, Japan, and Hong Kong led the decliners in the region.

[R][6:00AM New York, 6:00 PM Hong Kong - People’s Bank of China issues Rmb102 billion bills to mop up excess liquidity.[/R]

Market Sentiment

In Hong Kong trading the Hang Seng Index fell 1.35% or 317.96 at 23,305.04, and the China Enterprises Index of Hong Kong-listed mainland companies, or H shares, dropped 1.7%.

Daily turnover on main-board was HK$73.89 billion compared to HK$75.4 billion yesterday.

PBOC issues Rmb102 billion

The People’s Daily of China reported today that the People''s Bank of China yesterday issued two batches of central bank bills worth Rmb102 billion in order to mop up excess liquidity, adding the move was intended to maintain stable growth in the money supply and steady market interest rates.

The report noted that the Rmb78 billion of three-year bills and the Rmb 24 billion of three-month bills were auctioned at yields of 4.56% and 3.4% correspondingly.

Primary dealers such as commercial banks, securities firms, insurance companies that are approved by the central bank were targeted. Recently, PBOC issued Rmb195 billion of central bank bills.

The central bank is trying to soak excess money, from what is called M2 money supply which includes cash in circulation and deposits. M2 money supply rose 18.94% by the end of January, while Renminbi loans last month increased to Rmb803.6 billion from a year ago.

Metals Continue to Rise

Xinhua New Agency reported that the most actively traded zinc futures contract for delivery in May rose 4.2% to close at Rmb 20,525 per ton, while actively traded copper futures contract for delivery in May on the Shanghai Futures Exchange rose for the fourth straight day by 2% to close at Rmb 67,550 per ton.

Copper contract prices for May delivery jumped 15.7% from a month ago.

Telecom sector restructured

The Standard news reported today China’s state controlled radio yesterday said Beijing will reduce the number of mainland telecoms players from six to three and will announce its plan before the National People''s Congress meeting in March.

According to the report, China Telecommunications Corp, the largest fixed-line operator and parent of China Telecom, will acquire the CDMA network of mobile operator China United Telecommunications Corp.

The rest of China United, which includes its mobile network based on GSM technology, will be merged into China Network Communications Corp, the parent of China Netcom.

In addition, China Mobile Communications Corp, parent company of China Mobile, will merge with fixed line operator China Tietong Telecommunications Corp.

Gainers & Losers

Metal rose in Hong Kong trading trekking rising metal prices. Jiangxi Copper rose 3.5% to HK$18.90, Zijin Mining jumped 1.8% to HK$10.38 and Aluminum Corp of China increased 0.9% to HK$15.08.

Hongkong Electric Holdings Ltd gained 3.6%.

Hong Kong property developers plummeted after HSBC Holdings said there might not be any rate cuts in for the city’s banks. Cheung Kong Ltd edged down 2.35% and Henderson Land declined 4.1% as a result.

HK exchange, fell 4.1% at HK$146.90 after brokerage Goldman Sachs cut the stock to “neutral” from “buy”, citing investor sentiment will likely be affected by fears of a recession in the U.S.