China stocks fall, money market conditions extend improvement

Mon Jun 24, 2013 10:05pm EDT

SHANGHAI, June 25 (Reuters) - Chinese stocks extended losses
on Tuesday even as money market rates fell back towards more
normal level as the central bank signalled a slight softening in
its crackdown on easy credit by opting not to change the amount
of cash in the market.
    The CSI300 index of the largest mainland shares
was down 1.7 percent in early trade before paring losses, having
plunged more than 6 percent on Monday after the People's Bank of
China (PBOC) said liquidity in China's banking system was ample
and that banks needed to improve liquidity management. 
    In the money market, the overnight repo rate 
was at 5.73 percent on Tuesday morning on a weighted-average
basis, down from 6.65 percent at Monday's close and an all-time
high of 11.74 percent last Thursday .
    The benchmark seven-day repo rate opened at
5.73 percent on Tuesday, down from 7.53 percent at Monday's
close and an all-time high of 11.62 percent on Thursday. 
    At its open market operations window on Tuesday, where it
can inject or withdraw cash from the banking system, the PBOC
opted to do nothing. It also did not auction any central bank
bills, which would have taken funds from the market. 
    Though the market was likely hoping for a fund injection to
help ease cash conditions, the passive approach marked a slight
softening from last week when the central bank had drained four
billion yuan by issuing three-month central-bank bills.
. 
    With the central bank skipping both bill and repo issuance
on Tuesday, maturing repurchase agreements mean it is on course
to permit a small net injection of 25 billion yuan into the
banking system this week.
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