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Free AccessMNI China Daily Summary: Friday, May 4
TOPS NEWS: Tighter liquidity conditions across money markets is the
standout feature from MNI's latest monthly China Interbank Survey, which gauged
the opinions of 19 traders from financial institutions operating in China's
interbank market, the economy's main source of financing. The latest survey,
conducted between April 23 to April 27, shows 73.7% of respondents believe
liquidity conditions have deteriorated, the highest percentage since November
2017. That's up from 10% in March and 68.4% in April last year. The percentage
hadn't previously been over 50 this year.
DATA: China Caixin service PMI rose to 52.9 in April from 52.3 in March,
reflecting a faster growth of the service sector which the government is
campaigning to boost economic growth.
ANALYSIS: China's imports and exports may fall sharply in the second half
of the year, as uncertainties over a possible trade war with the U.S. may prompt
companies to move their orders up the schedule. A delegation of U.S. trade
officials, led by Treasury Secretary Steven Mnuchin, will hold trade
negotiations with China officials led by the Vice Premier Liu He on Thursday and
Friday. However, with no certainty trade tensions can be eased quickly, their
could be a near-term impact on both imports and exports.
LIQUIDITY: The PBOC injected CNY20 billion in 7-day reverse repos on
Friday, with the rate unchanged at 2.55%, the central bank said on its website.
This resulted in a net drain of CNY40 billion as a total of CNY60 billion
reverse repos matured today. The PBOC has drained a total of CNY70 billion by
its open market operations (OMO) this week. CFETS-ICAP's money-market sentiment
index closed at 35 on Thursday, down from 43 on Wednesday.
MONEY MARKET RATES: The 7-day repo average dropped to 2.7047% from 2.8080%
on Thursday, after the PBOC drained CNY40 billion via OMO. The overnight repo
average declined to 2.5500% from Thursday's 2.6279%.
YUAN: The yuan edged up against the U.S. dollar after the PBOC set a
stronger daily fixing. The yuan rose 0.01% to 6.3508 against the U.S. unit,
compared with the official closing price of 6.3532 yesterday. The PBOC set the
yuan central parity rate at 6.3521 Friday, much stronger than Thursday's 6.3732.
The central bank set the fixing stronger for the first time in five trading days
and today's gain recovered a third of the loss in the past four trading days.
BONDS: The yield on benchmark 10-year China Government Bond was last at
3.6400%, down from the previous close of 3.6500%, according to Wind Information.
STOCKS: Shares dropped in Shanghai led by computer companies after Huawei
Technologies Co. is reported to be investigated by the U.S. government, with
China National Software & Service, a client of Huawei, down by the 10% daily
limit. The benchmark Shanghai Composite Index declined 0.32% to 3,091.03. Hong
Kong's Hang Seng Index fell 1.1% to 29,980.55.
FROM THE PRESS: Local governments are planning to expand domestic demand
and further liberalizing their economies to boost growth, Shanghai Securities
Journal reported. Investment is regarded as an important growth driver, and the
construction of large infrastructure projects is speeding up, the Journal
concluded. For example, Jiangsu province plans to invest CNY3.5 trillion in 240
projects, while Jilin province will invest CNY1.7 trillion in 2,184 projects,
the Journal said. Local governments speeding up their construction plans will
contribute to China's stable economic growth this year, the Journal said, citing
analyst Chen Yanli at Shanghai Securities.
China Banking and Insurance Regulatory Commission is considering further
increasing credit support for microbusinesses, Economic Information Daily
reported, citing Wang Zhaoxing, deputy chairman of the commission. The
commission is coming up with a system to determine proper loan interest rates
for microbusinesses, Wang said. CBIRC's next step will be to place more
requirements on commercial banks to support the growth of microbusinesses. One
requirement will be to ensure that loans available to microbusinesses shall
expand at least as fast as that of their larger rivals, Wang noted.
Shanghai will look to start the Shanghai-London stock connect this year, as
well as other measures aimed at opening up its financial sector, China
Securities Journal reported citing Li Jun, deputy director at the city's office
of finance service. Shanghai will lead Chinese cities in increasing foreign
ownership and expanding foreign companies' operation in China, Li was cited by
the newspaper as saying. The city will also facilitate the internationalization
of the yuan, Li said.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.