MNI China Daily Summary: Monday, April 15

EXCLUSIVE: China’s manufacturing investment is set to maintain strong growth throughout the year thanks to policy stimulus, but weak demand means overcapacity will grow as well, depressing corporate profits and adding to the potential for trade friction, advisors and analysts told MNI.

EXCLUSIVE: Chinese demand for steel and copper construction products will fall over the second half despite government support measures, while appetite for those commodities used in manufacturing will grow as industrial output strengthens, local researchers have told MNI.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY100 billion via 1-year MLF and CNY2 billion via 7-day reverse repo, with the rates unchanged at 2.50% and 1.80%, respectively. There is CNY4 billion reverse repos matures today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8069% from 1.8336%, Wind Information showed. The overnight repo average decreased to 1.7090% from 1.7127%.

YUAN: The currency weakened to 7.2385 against the dollar from 7.2375 on Friday. The PBOC set the dollar-yuan central parity rate higher at 7.0979, compared with 7.0967 set on Friday. The fixing was estimated at 7.2444 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bond was last at 2.2760%, down from the previous close of 2.2775%, according to Wind Information.

STOCKS: The Shanghai Composite Index rallied 1.26% to 3,057.38 while the CSI300 index gained 2.11% to 3,549.08. The Hang Seng Index fell 0.72% to 16,600.46.

FROM THE PRESS: Some market insiders expect A-shares to rally after the State Council last week published a key guideline for the high-quality development of China's capital market, National Business Daily reported. The last two guidelines published in 2004 and 2014 precipitated bull markets with the Shanghai Composite Index reaching 6,124 points in 2007 and 5,178 points in 2015. The new guideline pledges to build a policy system that supports long-term value investment, encourage state-owned insurance companies’ long-term equity investment by improving their performance evaluation, and improve the investment flexibility of enterprise annuities and personal pensions. The Shanghai Index closed 0.49% down at 3,019.47 on Friday.

China’s exports are expected to maintain moderate growth in Q2 despite declining more than expected in March, according to Zhou Maohua, macro researcher at China Everbright Bank. Overseas demand outlook remains positive and business with Belt and Road countries and regional economies has good potential, Zhou added. Exporters will see better growth in Q2 even as firms face uncertainty from rising protectionism in the U.S and EU, Feng Lin, director at Dongfang Jincheng said, adding authorities needed policies to create a stable and predictable market environment for firms.

Authorities must improve the “white list” of property projects eligible to receive financial support, according to He Lifeng, vice premier of the State Council, noting lenders need to optimise and speed up loan approval and issuance. During a real-estate investigation tour of Zhengzhou, He said developers should take responsibility to prevent risks and ensure delivery, while city governments need to adjust regulations and policies according to local conditions and ensure the healthy development of the market. (Source: Yicai)