PBOC tightens market, channels cash to industries

In China, money market rates continued to ease on Thursday, the fifth day of moderation. It is the longest period of declines in at least two months, which comes after the central bank signalled it would add funds selectively to ease a cash squeeze.

The People's Bank of China allowed money market conditions to tighten and rates to soar last week, which has sparked fears of a credit squeeze in the world's second-largest economy. On Thursday, the central bank opted NOT to drain any cash from the money market, helping rates to dip.

The benchmark seven-day repo rate, a key indicator of the interbank borrowing cost, dropped 35 basis points to almost 7 percent in early trade. The overnight rate was flat at 5.5 percent. However, cash rates still hold WELL above the long-term averages. Earlier this week, the PBOC said that any liquidity injection will be focused on banks that are lending to support the real economy.