* C.bank does not inject or withdraw cash in open mkt ops
* Cash rates extend fall into fifth day, stocks rise
* Fears of crisis subside, but conditions to stay tight
By Gabriel Wildau and Lu Jianxin
SHANGHAI, June 27 Chinese money market rates
extended their moderation into a fifth day on Thursday after the
central bank did not drain any cash from the market, and stocks
recovered some of their big losses from earlier in the week as
investor sentiment steadied.
Money market rates remain elevated and liquidity is tighter
than normal, but the panic of a possible credit crunch that
gripped the market last week has subsided, traders say.
The People's Bank of China's (PBOC) wants to curtail the
diversion of funds to a vast non-bank lending market as it seeks
to shore up growth in the world's second-largest economy.
Its decision not to inject or withdraw funds at its regular
open market operations on Thursday signalled that while it was
not looking to tighten conditions further for now, it was also
holding the line on a campaign to rein in informal lending.
"The market is no longer panicked, even though the PBOC
refrained from injecting money via reverse repos in today's open
market operations, as the central bank has pledged to support
those banks which operate in line with official lines," said an
Asian bank trader in Shanghai.
On Tuesday the central bank sought to calm market fears of a
crunch by pledging to provide emergency liquidity to any bank
short of cash, and revealed that it had already done so for some
"But the market expects the PBOC to stick to a relatively
tight liquidity stance in the medium term, so it will be very
difficult for the benchmark seven-day repo rate to return to its
average levels between 3 and 4 percent seen until June," the
The benchmark seven-day repo rate dropped 35
basis points to 6.93 percent on a weighted-average basis in
early trade. The overnight rate was flat at 5.55
The weighted-average seven-day rate peaked at a record 11.62
percent last Thursday, though some trades were seen at 25
percent and higher, as the PBOC allowed conditions to tighten.
The improvement in bank funding conditions also boosted the
stock market. The CSI300 index of the largest Shanghai and
Shenzhen counters rose 0.8 percent in early trade,
after ending steady on Wednesday. However, it is still down
almost 9 percent since last Wednesday.