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(Z1) Bearish Trend Condition


IRZ1 Lifted


Rebound Retraced


XM Outperforms U.S. Counterpart Overnight

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DATA: China's producer price index measuring factory gate prices rose 9.0% y/y, accelerating from June's 8.8% gain, and outshining a forecast of 8.8%, according to the National Bureau of Statistics. While consumer price index eased to 1.0% y/y from 1.1% in July, registering a three-month low, though more than the forecast 0.8%. The deceleration was partly due to falling food prices led by the declining pork prices.

POLICY: The People's Bank of China will increase the base money supply at a moderate pace and push real loan rates lower to ensure the economy grows in a "reasonable range", the central bank said in its Q2 Monetary Policy Report Monday. Forward-looking policy will be improved to boost the recovery of small and medium-side businesses and sectors suffering from the pandemic, with continuation of from 2021 into 2022, it said, noting it will remain watchful for uncertainties from fiscal moves, issuance of government debt and policy changes of other major economies.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. The operation left liquidity unchanged given it netted off CNY10 billion reverse repos maturing today, according to Wind Information. The operation aims to keep 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 2.1387% from 1.9751% on Friday, Wind Information showed. The overnight repo average increased to 2.2579% from the previous 1.8784%.

YUAN: The currency weakened to 6.4780 against the dollar from 6.4688 on Friday. The PBOC set the dollar-yuan central parity rate higher at 6.4840, compared with the 6.4625 set on Friday, marking the biggest daily drop since Jun 17.

BONDS: The yield on 10-year China Government Bond was last at 2.8925%, up from 2.8400% on Friday, according to Wind Information.

STOCKS: The Shanghai Composite Index rallied 1.05% to 3,494.63 while the CSI300 index gained 1.30% to 4,985.56. Hang Seng Index increased 0.40% to 26,283.40.

FROM THE PRESS: China's foreign exchange reserves will remain stable after recording a new high since 2016 by end-July, as supported by stable economic recovery and strong exports, the China Securities Journal reported citing analysts. China's FX reserves rose by 0.68% m/m to USD3.2359 trillion, as the fall of the U.S. dollar index led to the appreciation of non-dollar assets, accounting for about onethird of China's FX reserves, the newspaper said citing Xie Yaxuan, analyst with Merchants Securities. The U.S. dollar may lack of continued upward momentum in the next few months, which could lead to a slight increase in the FX reserves, analysts were cited as saying. Chinese yuan will gradually appreciate against the dollar in the medium and long term as China's labor factor has a slight advantage over the American technology and capital factors, the newspaper said citing Wen Bin, chief researcher at Mingsheng Bank.

Resurging cases of the Covid-19 virus and the austere measures imposed by regional authorities may hurt consumption and service sectors of China's economy in the near term, reduce employment and slow logistics, said citing Wu Chaoming, the chief economist of Chasing Securities. About 200 areas in more than a dozen provinces have been classified as medium or high-risk zones as of Aug. 8, while 31 provinces issued warnings against long-distance travel, which will severely damage tourism, the newspaper said. Some cities such as central Zhengzhou are imposing restrictions unseen even during last year's worst period of the outbreak, the newspaper said. China's exports may play a reduced role in aiding recovery this time as western nations have adopted looser restrictions, which boost service consumption and may reduce the demand for Chinese goods, the newspaper said citing analyst Wang Jingwen with China Minsheng Bank. The government may need to increase policy support, led with fiscal measures including greater investments and bond issuances, the newspaper said citing Wu.

China may accelerate the opening of its interbank bond market while further allowing the issuance of bonds by overseas institutions in the exchange bond market, which will help boost the issuance of panda bonds, the Shanghai Securities News reported citing analysts. Total 45 panda bonds worth CNY67.9 billion were issued this year as of early August, an increase of 35% from last year, the newspaper said. The PBOC proposed to promote the reform of foreign debt registration and improve the management of domestic bond issuance by foreign institutions in its recent H2 work conference, the newspaper added.