MNI China Daily Summary: Friday, June 12

     REALITY CHECK: China's retail sales look set to continue recovering in May,

supported by robust sales and strong demand for cars as the coronavirus epidemic

eases, industry insiders told MNI, although the hospitality sector is still

struggling with tourism industry only very slowly getting back to normal.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY100 billion via

7-day reverse repos Friday, with the rate unchanged at 2.2%. This resulted in a

net drain of CNY50 billion given the CNY150 billion maturing, according to Wind

Information. The injection aims to keep liquidity reasonable and ample, the PBOC

said.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) decreased to 1.9066% from Thursday's close of 1.9799%, Wind

Information showed. The overnight repo average declined to 1.5164% from the

previous 1.7529%.

     YUAN: The currency weakened to 7.0745 against the dollar from 7.0698 on

Thursday. PBOC set the dollar-yuan central parity rate higher at 7.0865 compared

with the 7.0608 set for Thursday.

     BONDS: The yield on 10-year China Government Bond was last at 2.7700%,

unchanged from the close on Thursday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index was little changed to 2,9419.74. Hang

Seng Index decreased 0.73% to 24,301.38.

     FROM THE PRESS: The PBOC may cut the rate for Medium-term Lending Facility

by 5bps next Monday to stabilize market confidence, the Securities Times

reported citing an analysis by Citic Securities. The recent strength of the yuan

against appreciation gave the PBOC more room for easing and the clampdown on

high-yield bank deposits, which limits opportunities to arbitrage on itnerest

rates, may also suggest the Loan Prime Rate can be cut, the paper added.

     More mergers and acquisitions may take place in China's banking industry as

regional banks seek ways to replenish capital limited by rising bad loans due to

the outbreak, according to Shanghai Securities News citing Chang Liang, a

managing director with Citic Securities. The central bank will loosen

restrictions for regional banks to go public and allow companies and public

entities to invest in troubled banks, the newspaper reported citing an unnamed

source from a regional bank.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: archie.zhang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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