MNI China Daily Summary: Friday, September 1

EXCLUSIVE: China’s latest efforts to support the equity market will likely have limited impact, while share sale and IPO restrictions may increase financing difficulties for some companies, market experts and policy advisors told MNI.

DATA: China's Caixin manufacturing PMI rebounded 1.8 points to register 51 in August from July, rising back to the expansionary zone above the breakeven 50 mark again after briefly dipping below 50 in July, the financial publisher.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY101 billion via 7-day reverse repos, with the rates unchanged at 1.80%. The operation has led to a net drain of CNY120 billion after offsetting the maturity of CNY221 billion reverse repo today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.8003% from 2.2498%, Wind Information showed. The overnight repo average fell to 1.6690% from the previous 1.8868%.

YUAN: The currency strengthened to 7.2633 against the dollar from 7.2880 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1788, compared with 7.1811 set on Thursday. The fixing was estimated at 7.2880 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6600%, up from 2.6325% at Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.43% to 3,133.25 while the CSI300 index gained 0.70% to 3,791.49. The Hang Seng Index lost 0.55% to 18,382.06.

FROM THE PRESS: Chinese first-time homebuyers can negotiate with lenders to reduce the interest rates of their outstanding mortgages, either by changing the mortgage contracts, or refinancing existing mortgages starting Sept 25, according to a statement on the People's Bank of China website on Thursday. The adjusted rates should be no lower than the policy floor of first-home mortgages that the local city adopted when the original loan was issued, the central bank said. The estimated average reduction should land about 0.8 pp. Borrowers on a 25-year, CNY1 million loan with a rate lowering to 4.3% from 5.1% should save more than CNY5,000 per year in interest, which will also boost borrowing and spending capacity. (Source: Financial News)

Authorities recent efforts to boost the economy will strengthen the Yuan towards the end of the year, according to Guan Tao, former director of State Administration of Foreign Exchange. Guan said recent government measures like the reduction in stamp duty for securities trading and providing tax incentives for individuals who sell and repurchase homes within one year will improve economic fundamentals which lends support to the Yuan. In Q4 overseas companies will repatriate less dividends and study abroad students demand for foreign exchange will decrease, which will also support the Yuan. Guan said he expects August CPI and PPI will show improvements from July’s low point. (Source: Yicai)

The latest move to reduce outstanding mortgage rates for first-time homebuyers should take into account the net interest margin of commercial banks which stands at a record low level of 1.74%, said Sheng Songcheng, previously head of the statistics and analysis department at the People’s Bank of China. Currently, commercial banks have limited channels to replenish their capital and face declined net profit. Many banks said they will lower deposit interest rates starting in September, with the reduction ranging from 5-25bp. Sheng believes further stimulus should wait after the implementation and evaluation of recent measures to avoid home prices overshooting. (Source: Yicai)