MNI China Daily Summary: Friday, August 18

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY98 billion in 7-day reverse repos, with rates unchanged at 1.80%. The operation led to a net injection of CNY96 billion after offsetting the maturity of CNY2 billion reverse repo today, according to Wind Information. It aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9221% from 1.8964%, Wind Information showed. The overnight repo average rose to 1.9365% from the previous 1.8625%.

YUAN: The currency strengthened to 7.2896 against the dollar from 7.3103 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.2006, compared with 7.2076 set on Thursday. The fixing was estimated at 7.3047 in a Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6150%, down from 2.6200% at Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 1.00% to 3,131.95 while the CSI300 index fell 1.23% to 3,784.00. The Hang Seng Index tumbled 2.05% to 17,950.85.

FROM THE PRESS: China’s central bank will support the yuan's basic FX stability at a reasonable level, and will utilise the advantages of a managed float based on market mechanisms, according to the People’s Bank of China Q2 Monetary Policy Implementation Report. Authorities will closely monitor the policy of other major central banks, and will correct procyclical and unilateral behaviour in the FX market, the report said. On property, the PBOC will adapt policy to suit new supply and demand conditions and will increase financial support for leasing, urban-village renovation, and affordable housing construction. (Source: Yicai)

China may see a rebound in fixed-asset investment in Q3 as infrastructure construction accelerates and offsets declines in real estate investment, said Wang Qing, chief analyst of Golden Credit Rating. The rapid drop in fixed-asset investment growth to 3.4% y/y during January to July, from 3.8% in H1, was mainly attributed to a slide in real estate investment, said Wang Qing. Authorities should implement easing policies and fiscal support to ensure property sales and investment do not weaken further, said Wang Tao, chief economist at UBS China. She noted consumer demand would remain limited without more countercyclical support to hedge against low levels of property construction. (Source: Yicai)

Provinces across China said the banking industry accelerated clearance of non-performing assets in H1, with 18 of 22 provinces releasing data showing NPLs declined during the period. Bucking the trend were Beijing, Shanghai and Guangdong which showed a slight increase from last year, said Liao Zhiming, chief banking analyst at China Merchants Securities. Shanghai's NPL rate hit 0.98% by the end of June, up 0.19 pp, the largest increase among the disclosed regions so far, though remaining at a low level. (Source: Quanshang China)