MNI China Daily Summary: Friday, May 13

DATA: China's M2 money supply growth quickened to 10.5% y/y in April from 9.7% in March, outpacing the 9.9% forecast by market analysts and hitting the fastest rate since November 2020, the People's Bank of China (PBOC) data released Friday showed. New loans unexpectedly slumped to a more than 4-year low of CNY645.4 billion from March's CNY3.13 trillion as financing demand dropped sharply, with firms facing operational difficulties amid Covid outbreaks and rising production costs, the PBOC said in a statement. Aggregate financing, much lower than the expected level of CNY2.2 trillion, dropped to CNY910.2 billion from the previous CNY4.65 trillion, hitting the lowest since February 2020.

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1% on Friday. This keeps the liquidity unchanged 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 1.5496% from the close of 1.5735% on Thursday, Wind Information showed. The overnight repo average rose to 1.3119% from the previous 1.3078%.

YUAN: The currency strengthened to 6.7830 against the dollar from 6.7900 on Thursday. The PBOC set the dollar-yuan central parity rate higher for the sixth trading day at 6.7898, compared with 6.7292 set on Thursday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8125%, up from 2.8050% of Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.96% to 3,084.28, while the CSI300 edged up 0.75% to 3,988.60. The Hong Kong's Hang Seng Index rallied 2.68% to 19,898.77.

FROM THE PRESS: The Chinese economy is expected to move to an economic recovery inflection point with the Covid-19 outbreaks effectively controlled in Shanghai and Jilin province, with some leading indicators such as electricity consumption showing positive changes, the China News Service reported citing Sheng Laiyun, deputy director of the National Bureau of Statistics. China will stick to its dynamic zero-Covid policy, while expanding infrastructure investment, stablising employment and ensuring supply and price stability in food and energy, the newspaper said citing Sheng.

A yuan dip may be temporary, as the forex market generally expects Chinese regulators have sufficient tools to stabilise the currency, the 21st Century Business Herald reported citing an unnamed FX trader at a large state-owned bank. Some large asset management institutions have established long positions in the yuan between 6.81 and 6.83 against the U.S. dollar, looking for trading opportunities, the newspaper cited the trader as saying. After the yuan weakened by more than 5% in the past three weeks, institutions have begun to buy, as they believe speculation has driven the yuan below the equilibrium level. But the currency will soon usher in a return of value as the Chinese economy resumes steady growth, the newspaper said citing another unnamed trader at a large European asset management institution.

Most Chinese banks saw the ratio of non-performing real estate loans rise to varying degrees in 2021, the China Securities Journal reported citing annual reports from listed banks. The rate of non-performing real estate loans in ICBC, one of the big four state-owned banks, rose by 2.47 percentage points to 4.79% from 2020 to 2021, while that of smaller banks such as Bank of Suzhou had rose by 5 pps to above 5%, the newspaper said. Though the risk is generally controllable, banks will respond by conducting stress tests, strengthening list management, and increasing credit loss reserves, while meeting reasonable financing needs in real estate, the Journal said.