MNI China Daily Summary: Friday, September 20
EXCLUSIVE: The People’s Bank of China (PBOC) is planning additional measures to lower funding costs and boost credit demand as concern grows over meeting the government’s 5% 2024 GDP growth target and despite lender’s narrowed interest margin, which will continue to limit significant easing.
POLICY: China’s electricity consumption grew 8.9% y/y in August to 964.9 billion kWh, according to the National Energy Administration.
LIQUIDITY: The PBOC conducted CNY571.9 billion via 7-day reverse repos, with the rate unchanged at 1.70%. The operation led to a net injection of CNY335.7 billion after offsetting CNY236.2 billion maturities, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.9569% from 1.9717% on Thursday, Wind Information showed. The overnight repo average increased to 1.9362% from 1.8904%.
YUAN: The currency strengthened to 7.0552 against the dollar from 7.0660 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.0644, compared with 7.0983 set on Thursday. The fixing was estimated at 7.0646 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 2.0400%, down from Thursday's close of 2.0450%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index edged up 0.03% to 2,736.81, while the CSI300 index was up 0.16% to 3,201.05. The Hang Seng Index rose 1.36% at 18,258.57.
FROM THE PRESS: The PBOC is expected to ease banks’ liability costs by cutting rates and the reserve requirement ratio, allowing for lower existing mortgage rates and a reduction in household repayments, said Securities Times in a commentary. The Federal Reserve rate cut could allow for stronger coordination between the PBOC's purchasing of government bonds in the open market and the Ministry of Finance accelerating the issuance of treasuries, the newspaper said. Officials use of policy banks’ financial instruments and issuing additional treasuries was also possible, the news outlet noted. However, stimulus policies can be implemented progressively if the external environment continues to improve.
International institutions held CNY4.52 trillion of bonds in China’s interbank market at the end of August, up CNY1.34 trillion during the past 12 months, data from the PBOC showed. In terms of bond type, foreign institutions held CNY2.28 trillion of government bonds, CNY1.12 trillion of interbank deposit certificates, and about CNY950 billion of policy bonds. Wu Chaoming, vice president at the Finance and Credit Research Institute, said RMB bonds' low correlation with developed and emerging market debt yields allowed foreign investors to diversify and hedge.
Officials expect food prices to remain stable over the Golden Week holiday given the sufficient production capacity of live pigs, poultry and eggs, according to Jin Xiandong, spokesperson at the National Development and Reform Commission. Vegetable prices were generally stable with cucumber and rapeseed prices falling recently after a rise in August, Jin noted. The NDRC will strengthen market and price monitoring to ensure the supply and price stability of important commodities during key periods, Jin added.