MNI China Daily Summary: Monday, August 14

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY6 billion via 7-day reverse repos with the rate unchanged at 1.90%. The operation has led to a net injection of CNY3 billion after offsetting the maturity of CNY3 billion reverse repo today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.8231% from 1.7636% on Friday, Wind Information showed. The overnight repo average increased to 1.6913% from the previous 1.3322%.

YUAN: The currency weakened to 7.2537 against the dollar from 7.2340 on Friday. The PBOC set the dollar-yuan central parity rate higher at 7.1686 on Monday, compared with 7.1587 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.6675%, down from Friday's close of 2.6830%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.34% to 3,178.43, while the CSI300 index lost 0.73% to 3,855.91. The Hang Seng Index dropped 1.58% to 18,773.55.

FROM THE PRESS: China’s State Council has unveiled 24 policy measures to attract foreign direct investment into the country to overcome adverse conditions such as weak global economic recovery and shrinking external demand, according to Yicai. Policymakers aim to support foreign firms by offering more financial and tax support, stronger IP rights and ensuring equal treatment. Bai Ming from the Research Institute of the Ministry of Commerce said China’s high quality development will benefit from FDI and foreign companies will find opportunities in China’s large market. (Source: Yicai)

Country Garden, once China’s largest real estate developer by sales, said it will suspend trading 11 onshore bonds starting Monday as it plans to hold a meeting on bond redemption arrangements. It is estimated the total amount of bonds suspended exceeds CNY16 billion. The company said it faces a liquidity crunch that is “the greatest difficulty since our founding”, and will communicate with stakeholders and consider various debt management measures to protect the rights and interests of investors. (Source: 21st Century Business Herald)

The PBOC will likely increase liquidity injections in August and September as sales of new local government bonds could soar due to local authorities aiming to finish selling their full quota of special bonds by the end of Q3. A total of CNY1.58 trillion new special bonds are expected to be issued in Q3, and CNY196 billion were sold in July. The PBOC may increase the amount of open market operations, roll over maturing medium-term lending facilities with excessive amounts, or cut the reserve requirement ratio (RRR), said Wang Yifeng, chief financial analyst at Everbright Securities. The central bank may cut RRR by 25bp in September ahead of a larger amount of MLF maturities, also draining liquidity in Q4, said Hu Xiaoli, analyst at CIB Research. (Source: China Securities Journal)