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China Money Rate Drops for Third Day as ‘Hot’ Fund Inflows Seen

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Jan. 25 (Bloomberg) -- China’s money-market rate dropped for a third day on speculation capital inflows will increase this year as a recovery in the world’s second-biggest economy gains momentum.

The State Administration of Foreign Exchange, China’s currency regulator, said the nation may face an influx of “hot money” as the economy stabilizes and global liquidity increases. The central bank drained a net 49 billion yuan ($7.9 billion) from the financial market this week, a fourth week of withdrawals, according to data compiled by Bloomberg.

“Capital inflows will help increase cash supply in the financial system,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender.

The seven-day repurchase rate, which measures interbank funding availability, dropped 14 basis points today and this week to 2.70 percent as of 4:30 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, declined two basis points today and this week to 3.15 percent, according to data compiled by Bloomberg.

The preliminary reading of a Purchasing Managers’ Index was 51.9 in January, compared with the 51.5 final reading for December, according to a statement from HSBC Holdings Plc and Markit Economics yesterday. Fifty is the dividing line between expansion and contraction.

The yield on the 2.95 percent government bond due August 2017 was unchanged today and this week at 3.23 percent, according to the Interbank Funding Center. A basis point is 0.01 percentage point.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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