MNI China Daily Summary: Friday, March 18

LIQUIDITY: The People's Bank of China (PBOC) injected CNY30 billion via 7-day reverse repos with the rates unchanged at 2.10%. The operation has led to a net injection of CNY20 billion after offsetting the maturity of CNY10 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.0616% from the close of 2.0792% on Thursday, Wind Information showed. The overnight repo average fell to 1.9870% from the previous 1.9980%.

YUAN: The currency weakened to 6.3641 against the dollar from 6.3494 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 6.3425, compared with 6.3406 set on Thursday.

BONDS: The yield on the 10-year China Government Bond was last at 2.7975%, down from 2.8000% of Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 1.12% to 3,251.07, while the CSI300 edged up 0.67% to 4,265.90. The Hong Kong's Hang Seng Index fell 0.41% to 21,412.40.

FROM THE PRESS: The yuan is likely to trade 6.3 to 6.5 against the dollar even after the U.S. Federal Reserve has begun to hike interest rate, Yicai.com said citing analysts. Foreign investors may continue to see China market's potential, and more capital is still forecast to be entering China's bond market though at a slower pace, said the news service. China has more policy space to support economic growth while overseas central banks are entering rate-hike cycles, Yicai said. As China adjusts its approach toward managing Covid-19 outbreaks and the government took measures to ease investors' concerns on issues including the real estate market, more overseas capital is expected to flow into China, it said.

China must allow the yuan to be flexible and let the exchange rate be the first barrier to absorb external shocks and ensure greater autonomy of its monetary policy in the face of the Federal Reserve’s tightening, China Finance 40, a prominent think tank, said in a blog post. China should cut rates and banks' reserve requirement ratios to stimulate the credit demand of the private sector, lower domestic financing costs and help the real economy repair the balance sheets as soon as possible, it said. China must also steadily open its capital account and financial markets to attract more medium and long-term capital, it added.

Chinese President Xi Jinping ordered adherence to the country’s zero-Covid policy to curb the “worst outbreaks” in two years caused by the Omicron variant, the Global Times said. Xi, speaking at Thursday’s meeting of the Standing Committee of the Politburo of the CPC Central Committee, asked the government to prepare for difficulty in Covid-19 response and warned officials to be vigilant, the newspaper said. Cases in China have nosedived, with 1,860 confirmed cases recorded on Tuesday, compared with 3,500 on Monday, the newspaper said.