MNI China Daily Summary: Friday, September 27

EXCLUSIVE: Beijing must continue to pursue equity market reform and provide fiscal stimulus to consolidate recent A-share gains driven by the central bank’s monetary easing, and the planned introduction of new capital market financing tools, advisors and analysts told MNI.

POLICY: The People’s Bank of China (PBOC) cut the reserve requirement ratio by 50bps and 7-day reverse repurchase operation rate by 20bps on Friday, according to a statement on its website. The RRR reduction, which excludes banking institutions already implementing a 5% RRR, adjusts the weighted average RRR to 6.6%. The 7-day reverse repo rate is lowered to 1.5% from 1.7%, and remains the basis for establishing the 14-day reverse repo, temporary repo and reverse repo rates, the statement said.

LIQUIDITY: The PBOC conducted CNY333 billion 14-day reverse repos, with the rate lowered to 1.65% from the previous 1.85%. The operation led to a net drain of CNY238.9 billion after offsetting maturities of CNY571.6 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6642% from 1.8464% on Thursday, Wind Information showed. The overnight repo average decreased to 1.3983% from 1.6069%.

YUAN: The currency strengthened to 7.0160 against the dollar from 7.0200 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.0101 on Friday, compared with 7.0354 set on Thursday. The fixing was estimated at 7.0111 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.0250%, down from Thursday's close of 2.0575%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index was up 2.89% to 3,087.53, while the CSI300 index rallied 4.47% to 3,703.68. The Hang Seng Index rose 3.55% at 20,632.30.

FROM THE PRESS: China’s leaders signalled additional pro-growth policies at the Politburo meeting this week, greatly boosting investor confidence, with some private equity funds noting the stock market could have bottomed out and might rebound, 21st Century Business Herald reported. Additional special treasury bonds to replenish banks’ capital could be issued, as well as local government special bonds to help resolve implicit debts, said Li Zhan, chief economist at China Merchants Fund. The central government could directly purchase unsold housing or subsidise local governments to buy property following policymakers’ calls to stabilise the housing market from further falls, the news outlet noted.

Technical teams from China and the EU are negotiating a flexible price commitment plan to resolve the Brussels anti-subsidy case against Chinese electric vehicles, He Yongqian, spokesperson at the Ministry of Commerce told reporters. The working team discussions follow the direction set at the leadership meeting on Sept 19, He added. China would make every effort to agree a solution framework before the final decision, He noted. (Source: MOFCOM website)

Pork prices in China, a key component of CPI, fell to CNY19.6 per kg in the third week of September, down 2.2% from the previous week, and falling 6% from the third week of August, 21st Century Business Herald reported. The news outlet noted prices fell after planned pig output in September increased by 9.26% month-on-month leading to an increase in supply. Looking ahead, prices are likely to increase mildly around the October holiday before moderately declining in November and December due to an increase in output, analysts said.