MNI China Daily Summary: Friday, September 15

POLICY: China’s economy will continue to improve in the near term as government policies to stabilise the housing market and promote the private economy increasingly take effect, said Fu Ling Hui, spokesperson at the National Bureau of Statistics (NBS) at a press conference.

DATA: Industrial production rose 4.5% y/y in Aug to hit a four-month high, outperforming the 4.0% forecast and accelerating from July's 3.7%, data released by the NBS showed. Retail sales increased 4.6% y/y, beating expectations for 3.0% and accelerating from July's 2.5%. Fixed-asset investment over Jan-Aug registered a 3.2% y/y increase, the lowest since December 2020, slower than the 3.4% growth in Jan-July and lower than the 3.4% consensus.

LIQUIDITY: The People's Bank of China (PBOC) reduced its 14-day reverse repo rate by 20bp to 1.95% and held the seven-day reverse repo rate and medium-term lending facility unchanged at 1.8% and 2.5%.The central bank conducted CNY591 billion via one-year MLF, CNY105 billion via seven-day repo and CNY34 billion via 14-day repo. The operation has led to a net injection of CNY367 billion after offsetting the maturity of CNY363 billion reverse repos and CNY400 billion MLF today, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.9079% from 1.9463%, Wind Information showed. The overnight repo average fell to 1.7548% from the previous 1.7646%.

YUAN: The currency strengthened to 7.2691 against the dollar from 7.2701 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1786, compared with 7.1874 set on Thursday. The fixing was estimated at 7.2835 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6900%, up from 2.6700% at Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.28% to 3,117.74 while the CSI300 index lost 0.66% to 3,708.78. The Hang Seng Index gained 0.75% to 18,182.89.

FROM THE PRESS: The PBOC has cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points from Friday, the second cut this year. The cut will release over CNY500 billion of medium- and long-term liquidity, and reduce bank capital costs by CNY7-8 billion per year to help ease pressure from falling interest margins and profits due to the decline in existing mortgage interest rates, said Dong Ximiao, chief researcher at Merchants Union Consumer Finance Company. It further sends a strong signal to the market that the central bank is determined and capable of using a variety of policy tools to help stabilise economic recovery. (Source: Yicai)

Commodity prices have bottomed since July, though macroeconomic data has not verified an economic rebound, according to Caixin. As of Sept. 8, the Nanhua Commodity Index has reached its highest level since the pandemic, recording 2555.88, a rise of 18% from May 26's low point. Recent relaxation to property regulations, subsequent upward CPI cycle and manufacturers' replenishing inventory at low prices have indicated the economy is near its bottom, said Guo Lei, chief economist at GF Securities. The Nanhua Index measures various commodity prices mainly including crude oil, rebar and iron ore. (Source: Caixin)

The upcoming Mid-Autumn Festival and National Day holiday may create a new tourism peak as bookings for hotels and tickets for the eight-day holiday increased by nearly six times y/y, according to data by Fliggy, an online travel platform. Train tickets for many popular cities including Beijing and Shanghai have sold out, and hotel prices near tourist attractions in many cities have generally increased by more than 2-3 times. As the first long break without any Covid-19 restrictions, outbound travel bookings rose by over 20 times y/y, according to Fliggy. (Source: The Paper)