MNI China Daily Summary: Friday, May 31

POLICY: China should adjust public utilities prices only in a reasonable manner and take consumer rights seriously, the China Consumers Association said.

POLICY: China's manufacturing Purchasing Managers' Index dropped by 0.9 points to 49.5 in May, falling below the breakeven 50 level after expanding for two consecutive months, tamed by weak demand and the high base formed by rapid manufacturing growth earlier, data from the National Bureau of Statistics showed.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY100 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to a net injection of CNY98 billion after offsetting the CNY2 billion maturity today, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.8675% from 1.9177%, Wind Information showed. The overnight repo average increased to 1.8137% from 1.7318%.

YUAN: The currency strengthened to 7.2440 against the dollar from 7.2455 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1088, compared with 7.1111 set on Thursday.

BONDS: The yield on 10-year China Government Bonds was last at 2.3275%, up from 2.3250% at Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.16% to 3,086.81 while the CSI300 index decreased 0.40% to 3,579.92. The Hang Seng Index fell 0.83% to 18,079.61.

FROM THE PRESS: Beijing will not sit idle should the EU implement tariffs against Chinese EVs, Mao Ning spokesperson at the Ministry of Foreign Affairs told reporters. Xinhua news reports three senior German officials have spoken out against tariffs, noting potential damage to the German economy. Great Wall Motors announced the closure of its EU HQ in Munich, with Yicai blaming the market situation and protectionist measures. (Source: Yicai)

China’s financial data including M2 money supply growth this month may largely decelerate as some resident and corporate deposits are converted into investment on long-term treasury bonds, with market liquidity converged, Securities Times reported. While the central bank controlling the gate of general money supply, the flow of deposits and loans depends on the needs of different types of borrowers, requiring fiscal and other policies to exert synergistic force, the Times said citing unnamed analysts. The newspaper noted that M2 growth will slow down in future with the development of direct financing, which does not represent weakened financial support but a reflection of improved financing structure to meet the needs of the real economy better.

Freight prices could further rise in the short term as the peak season in the international shipping market is ahead of schedule, Shanghai Securities News reported citing Ju Weihao, researcher at Gainsense Futures. The ongoing geopolitical conflicts make the resumption of sailing in the Red Sea area elusive, leading to a capacity gap of about 20% in the European line in Q2. Meanwhile, the replenishment cycle in Europe and the U.S. started earlier than expected amid strong Eurozone PMI. High freight rates may not be sustainable, as the transportation shortage may ease when the peak season ends, alongside rising supply of shipping capacity following the delivery of new ship orders, Ju was cited as saying.