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TOP NEWS: The People's Bank of China (PBOC) unexpectedly lowered two key policy interest rates on Monday, after total social financing fell to a six-year low in July, making the first such cuts since January. The PBOC cut the rate applied to the one-year medium-term lending facility by 10 bps to 2.75%, while it injected CNY400 billion in gross liquidity via the instrument. It also lowered the rate applied to 7-day reverse repos by 10 bps to 2.00% while injecting CNY2 billion in gross liquidity via the instrument. This resulted in a net drain of CNY200 billion given today's maturity of CNY600 billion of MLFs and CNY2 billion of reverse repos, according to Wind Information.
DATA: Industrial production rose 3.8% y/y in July, decelerating from June's 3.9%, missing the forecast 4.5%, data by the National Bureau of Statistics showed. Retail sales eased moderately to 2.7% y/y in July from June's 3.1%, underperforming the forecast 5.0% gain. Fixed-asset investment eased to 5.7% y/y in the first seven months, from the 6.1% gain in H1, also lower than the 6.2% forecast.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.3350% from 1.3486% on Friday, Wind Information showed. The overnight repo average fell to 1.0417% from the previous 1.0432%.
YUAN: The currency weakened to 6.7632 against the dollar from 6.7349 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.7410, compared with 6.7413 set on Friday.
BONDS: The yield on 10-year China Government Bonds was last at 2.6570%, down from the previous close of 2.7275%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.02% to 3,276.09 while the CSI300 index lost 0.13% to 4,185.68. The Hang Seng Index fell 0.67% to 20,040.86.
FROM THE PRESS: China’s benchmark Loan Prime Rates may decline further, with a particular focus on the five-year measure, the China Securities Journal reported, citing analysts. Among the newly issued loans in June, the proportion of loans with interest rates lower than the LPRs has increased, which may drive down the latest quotation of the LPRs, the newspaper wrote, citing Xie Yunliang, chief macro analyst of Cinda Securities. The weighted average interest rate of newly issued loans in June hit a new low, the newspaper noted, citing the PBOC’s Q2 Monetary Policy Report. The central bank updates LPR quotations on the 20th of every month (or the soonest day afterwards if the 20th falls on a weekend), and the current 1-year and 5-year LPR fixings sit at 3.70% and 4.45%, respectively.
The delisting of five Chinese state-owned companies, including PetroChina, Sinopec and China Life Insurance, from the New York Stock Exchange will not have a great impact on Chinese stocks and the capital markets of China and the U.S., nor does it point to a want for financial “decoupling”, Economic Daily reported, citing analysts. These companies chose to delist because of high costs and regulatory issues, and most of their shares are listed on the exchanges in mainland China and Hong Kong, with less than 1% of total shares listed on NYSE, the newspaper said. This should not trigger a wave of similar delistings, and Chinese regulatory authorities will firmly support companies to list where they wish, the Daily said.
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