China central bank drain biggest weekly liquidity
The People's Bank of China (PBOC), the country's central bank, drained 590 billion yuan (about 84.3 billion U.S. dollars) from the banking system this week, the biggest weekly liquidity withdrawal since mid-February.
The PBOC skipped open market operations via reverse repos the whole week, citing reasonably sufficient liquidity.
With a total of 590 billion yuan of reverse repos maturing from Monday to Friday, the PBOC withdrew 590 billion yuan from the banking system.
This represents the biggest weekly withdrawal since midFebruary when the central bank drained 680 billion yuan from the banking system from Feb. 11 to 15. A reverse repo is a process by which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.
China vowed to keep its prudent monetary policy "neither too tight nor too loose" while maintaining market liquidity at a reasonably ample level in 2019.
Most Asian markets rose on Friday as traders overcame early jitters about the ChinaUS trade talks that were fuelled by a report saying Beijing officials had raised doubts about the chances of a long-term deal. Investors were also spooked by a speech by
Secretary of State Mike Pompeo, in which he called China "truly hostile" to the US, leading Beijing to accuse the White House of "viciously" attacking it.
The flare-up comes just as the two sides put the finishing touches to a mini trade pact that is seen as the first phase of a wider agreement, with toplevel phone talks due to take place later Friday.
Recent signs of progress in the long-running dispute have provided some much-needed support to equity markets in recent weeks, with most markets posting some healthy gains. Wall Street, where the S&P 500 had hit a record high Wednesday, turned lower after Bloomberg News reported that Chinese officials were sceptical they would be able to reach a comprehensive long-term deal.
It said they warned they would not budge on key issues, while they were also concerned about Donald Trump's impulsiveness and were even worried about the chances of getting the current agreement finished. "The article proved a not-too-subtle reminder of how quickly trade war sentiment can pivot and highlighting those fears that we all knew about but were perhaps was too wrapped up (in) the phase one euphoria to recognise," said AxiTrader's Stephen Innes.
"Specifically, the trust gap is the bridge too far and what's going on behind the shiny veneer of an apparent trade detente, the thorny Hong Kong protest bill," he added, referring to US lawmakers passing a bill defending civil rights in the financial hub.
National Australia Bank's Ray Attrill added that expectations would be low for anything past phase one being agreed ahead of the 2020 presidential election. "Yet some market participants evidently held the view that passage of phase one could quickly lead to progress on phase two next year," he said.
Pompeo hit out at China's clampdown on Hong Kong protests and its incarceration of Uighur Muslims, and said Beijing was seeking international domination. China responded by accusing the US of "arrogance and fear".
Still, after an early sell-off, Asian traders took the developments in their stride and the mood picked up through the day to give the region's equity markets a healthy end to the week. Hong Kong rose 0.7 percent to its highest close since mid-September as dealers brushed off a much-sharperthan-expected dive in thirdquarter economic growth caused by the trade war and months of sometimes-violent protests that have hammered its tourism and retail sectors.
Shanghai jumped one percent after a private gauge of Chinese manufacturing activity showed an improvement, soothing worries about official reading that pointed to further contraction in the sector.