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Free AccessMNI China Daily Summary: Friday, September 16
POLICY: The People’s Bank of China (PBOC) could officially reintroduce the counter-cyclical factor into its yuan pricing model as one tool to slow any sharp slide in the currency after it breached 7 against the U.S. dollar for the first time since mid-2020 despite recent efforts to stem the selling momentum.
POLICY: The Chinese economy is expected to recover and grow within a reasonable range following the improvements in August economic indicators, said Fu Linghui, spokesman of the National Bureau of Statistics (NBS) at a briefing. China will continue to promote investment by making good use of policy bank-backed infrastructure funds and tapping into the remaining quota of project-backed local government special bonds, said Fu.
DATA: Industrial production rose 4.2% y/y in August from July's 3.8%, beating the consensus forecast for a 3.8% rise, NBS data released showed. Retail sales rebounded to 5.4% y/y in August from July's 2.7%, exceeding the forecast 3.1% gain. Fixed-asset investment edged up to 5.8% y/y in the first eight months compared to the 5.7% gain in the Jan-Jul period. This bettered the median forecast for a 5.6% rise.
LIQUIDITY: The PBOC injected CNY2 billion via 7-day reverse repos with the rate unchanged at 2.0%. This keeps the liquidity unchanged after offsetting the maturity of CNY2 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.6097% from 1.5116% on Thursday, Wind Information showed. The overnight repo average rose to 1.2955% from the previous 1.2243%.
YUAN: The currency weakened to 7.0166 against the dollar from 6.9775 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 6.9305, compared with 6.9101 set on Thursday.
BONDS: The yield on 10-year China Government Bond was last at 2.6700%, up from Thursday's close of 2.6615%, according to Wind Information.
STOCKS: The Shanghai Composite Index tumbled 2.30% to 3,126.40 while the CSI300 index lost 2.35% to 3,932.68. The Hang Seng Index edged down 0.89% to 18,761.69.
FROM THE PRESS: There is no reason for an ongoing depreciation in the yuan, and the currency may rebound in Q4 as the U.S. dollar Index peaks and falls on a slower pace of Federal Reserve hikes and as China's economy rebounds, the Securities Daily reported citing analysts. The offshore yuan breached the 7 mark against the dollar on September 15, while the onshore yuan traded as low as 6.998. The yuan weakness has been driven by the U.S. dollar rally, but the yuan is relatively stable compared to currencies of other major developed economies. The economic recovery in Q3, moderate inflation, and surpluses in the current account and direct investment should support the stability of the yuan.
Major state-owned banks’ move to cut deposit interest rates is expected to lead to a reduction in the benchmark Loan Prime Rate, the Securities Daily reported citing analysts. Though the central bank kept the rate of its medium-term lending facility, the anchor for the LPR, unchanged on Thursday, banks can submit a lower LPR quotation as the cost of liabilities fall. The central bank is also likely to lower costs by cutting the reserve requirement ratio as CNY2 trillion of medium-term lending facilities mature in Q4, the newspaper said citing Minsheng Bank chief economist Wen Bin.
More Chinese cities, including some first-tier cities, are expected to relax or remove home purchase restrictions to prop up the housing market, the Securities Daily reported citing Tongce Research Institute research director Song Hongwei. Qingdao in Shandong province, has become the third key second-tier city to relax home purchase restrictions this month, following Ningbo and Suzhou. Only two main districts in Qingdao will continue with purchase limits, while for non-restricted areas, homebuyers are allowed to purchase more than 3 homes. Since the beginning of the year, 29 cities have relaxed restrictions on home purchases, the newspaper calculated.
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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.