CHINA PRESS: Local Governments Expect Low Fiscal Revenue In 2025

• PBOC issued CNY123bn of 7-day reverse repo in this morning’s open market operations.
• Today’s maturities CNY24.8bn
• Total net issuance CNY98.2bn
• The PBCO controls and maintains liquidity in the interbank market through the issuance of reverse repo.
• In recent days liquidity has been drained from the system in what many are viewing as an attempt to halt the bond market’s relentless rally,  it is likely that ahead of Lunar New Year holidays, the PBOC will continue to inject liquidity into the system.  
• China's Overnight Repo rate is up +0.30 this morning at 1.8076
• The Lunar New Year holidays sees China out Jan 28-Feb 04 inclusive.  

• As widely anticipated, China left the 1 and 5 year loan prime rates on hold today at 3.10% and 3.60% respectively.
• The rates are determined by a commercial bank panel and provides an insight into the thinking of lenders, prior to the National People's Congress in March.
• With a move to a more accommodative stance, what is likely is a wait and see approach as to the policy is interpreted and the actions that are to come out of the NPC before any move in monetary policy.
• For that reason, and with Lunar New Year holidays imminent, there was no need for commercial banks to alter their lending rates at a time when activity is muted.
• Actions to watch post the NPC will be any changes to the reverse repo rate and or RRR cuts, though given the improving nature of data witnessed last week, it appears there may be no rush in rate cuts.
• The Lunar New Year holidays sees China out Jan 28-Feb 04 inclusive.  

Asian markets are trading higher today, supported by strong US economic data and a rally in US tech stocks last week. There has been increased optimism in China while the PBOC kept loan prime rate unchanged, as expected with the PBOC balancing domestic demand weakness with currency stability. Broader market sentiment remains supported by reduced global rate hike fears, though geopolitical and policy uncertainties, including Trump’s second-term agenda, keep markets cautious.

• Japan's Topix and Nikkei indices both rose 1.40%, driven by gains in export-related stocks like Toyota and banks, as the yen weakened. Investors are also optimistic about the upcoming Bank of Japan policy meeting, with expectations of a rate hike boosting sentiment.
• South Korea’s KOSPI opened higher however has given back back to now trade flat, gains in steelmakers like POSCO and battery producers have been offset following automakers and chip manufacturers trading lower.
• Taiwan's TAIEX is trading 0.40% higher, although TSMC & Hong Hai are underperforming global semiconductor peers after the Philadelphia SE Semiconductor Index rose by 2.85% on Friday
• The Chinese market is buoyed by improving US-China relations after a positive call between Trump and Xi Jinping, which lifted risk appetite. The CSI 300 is trading 0.60% higher, while in Hong Kong the HSI is 1.15% higher, tech is the top performing sector with the HS Tech Index 1.70% higher.
• Australia's ASX 200 is 0.30% higher, with Financial and Material stocks outperforming. New Zealand's NZX 50 is trading 0.45% lower.