MNI China Daily Summary: Wednesday, March 30

POLICY: A record-high number of Chinese residents prefer saving money, while fewer say they are willing to spend, according to a quarterly survey by the People’s Bank of China (PBOC) published Wednesday. The survey comes at a time when rising global uncertainties and a worsening Covid outbreak weaken consumer confidence in the economy.

LIQUIDITY: Liquidity across China’s interbank markets tightened in March, with banks’ more cautious as they look to keep their books healthy ahead of the quarter-end Macro Prudential Assessment (MPA), the latest MNI Liquidity Conditions Index shows. The Liquidity Condition Index jumped to 63.3 in March, up sharply from 10.0 in February, with a third of traders reporting condition as “tighter than last month”. The higher the index reading, the tighter liquidity appears to survey participants.

LIQUIDITY: The PBOC injected CNY150 billion via 7-day reverse repos with the rates unchanged at 2.10%. The operation has led to a net injection of CNY130 billion after offsetting the maturity of CNY20 billion repos today, according to Wind Information. The operation aims to keep liquidity stable at the end of the quarter, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.2284% from the close of 2.1816% on Tuesday, Wind Information showed. The overnight repo average fell to 1.5033% from the previous 1.6931%.

YUAN: The currency strengthened to 6.3526 against the dollar from 6.3722 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 6.3566 on Wednesday, compared with 6.3640 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.7975%, down from 2.8025% on Tuesday, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 1.96% to 3,266.60, while the CSI300 rallied 2.90% to 4,254.10. The Hong Kong's Hang Seng Index rose 1.39% to 22,232.03.

FROM THE PRESS: The PBOC may still stick to its own easing policy to support growth despite China's sovereign bonds losing yield advantage over the U.S., the China Securities Journal reported citing analysts. However, the central bank is seen as more likely to ease through RRR cuts or other structural adjustments, while the expectation for a rate cut has cooled, the newspaper said. The China-U.S. yield spread fell to about 30 bps from more than 100 bps in early March, the newspaper said. However, given China's lower inflation and high trade surplus, the narrowing spread may not cause significant depreciation of the yuan or capital outflow, the newspaper said.

Home sales in key cities saw a more obvious increase from last month, with the figure in four first-tier cities rising by 12% in March from February, showing some signs of stabilization following the relaxation on mortgage loans, the China Securities Journal reported. However, housing markets in smaller cities still face sharp declines from the same period last year, the newspaper said. On the whole, the market remains muted as home buyers lack confidence and the repeated epidemics have further dragged down the pace of recovery, the newspaper said citing Chen Wenjing, an analyst at China Index Academy.

China is unlikely to have any prolonged period with zero covid cases due to the highly contagious variant it is battling and the widespread infections within the country, the government-run Global Times said citing an unidentified expert from the Chinese Center for Disease Control and Prevention (CDC). China should find new ways to cope with large-scale outbreaks, the newspaper said citing Zeng Guang, a former chief epidemiologist of the Chinese CDC.