MNI China Daily Summary: Monday, February 05

POLICY: China’s top securities regulator said it will control the quality of initial public offerings and increase delisting efforts to improve the quality of listed companies and maintain capital-market stability, according to a statement by the China Securities Regulatory Commission on its website Sunday.

LIQUIDITY: The PBOC conducted CNY100 billion via 14-day reverse repo, with the rates unchanged at 1.95%. The reverse repo operation has led to a net drain of CNY400 billion reverse repos after offsetting CNY500 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9678% from 1.9431%, Wind Information showed. The overnight repo average decreased to 1.6877% from 1.7157%.

YUAN: The currency weakened to 7.1982 against the dollar from previous close of 7.1793. The PBOC set the dollar-yuan central parity rate higher at 7.1070, compared with 7.1006 set on Friday.

BONDS: The yield on 10-year China Government Bonds was last at 2.3970%, down from 2.4025% at the previous close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 1.02% to 2,702.19 while the CSI300 increased 0.65% to 3,200.42. The Hang Seng Index fell 0.15% to 15,510.01.

FROM THE PRESS: The benchmark Loan Prime Rates are likely to be lowered in February following the cut to the reserve requirement ratio releasing CNY1 trillion in liquidity, along with lowered targeted relending rates for agriculture and small business and reduced deposit interest rates earlier, said Wen Bin, chief economist at Minsheng Bank. Uncertainty exists over whether the PBOC will cut the medium-term lending facility rate as early as February, said Wen. The PBOC may be concerned about declining net interest margin of commercial banks and high levels of global interest rates at the current stage, the timing of any rate cut may be later as inflation remains negative and real interest rates remain high, said Bian Quanshui, chief macro analyst with Western Securities. (Source: Securities Daily)

Authorities have issued CNY864.6 billion in credit to support urban village transformation in 19 cities so far, according to a report by the 21st Century Business Herald. Cities received the funds via the PBOC’s pledged supplementary lending (PSL) facility issued through policy banks, the Herald understands. Regional authorities are using the loans for pre-project work, land acquisition, compensation and resettlement, and construction of resettlement housing. Banks have lowered loan cost and risk by lending to entities above municipal level, who are in turn re-lending to entities at county and city level.

The China New Economy Index (NEI) recorded 29.4 in January, declining by 0.5 percentage points from the previous month to near the historical midpoint, said the financial publisher Caixin. The index means new economic investment accounts for 29.4% of the total economic investment, with labor force, capital and technology weighing 40%, 35% and 25%. The fall in venture capital within the new economy drove the index lower.