MNI China Daily Summary: Monday, June 28

LIQUIDITY: The People's Bank of China (PBOC) injected CNY30 billion via 7-day reverse repos with the rate unchanged at 2.2% on Monday. The operation resulted in a net injection of CNY20 billion given the maturity of CNY10 billion reverse repos today, according to Wind Information. The operation aims to keep liquidity stable at half-year end, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.2903% from 2.1972% on Friday, Wind Information showed. The overnight repo average increased to 1.5676% from the previous 1.5250%.

YUAN: The currency weakened to 6.4565 against the dollar from 6.4553 on Friday. The PBOC set the dollar-yuan central parity rate lower for a second trading day at 6.4578, compared with the 6.4744 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 3.1225%, up from 3.1075% on Friday, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.03% to 3,606.37 while the CSI300 index gained 0.23% to 5,251.76. Hang Seng Index lost 0.07% to 29,268.30.

FROM THE PRESS: China must continue expanding domestic demand and boost consumption to drive economic growth, and policymakers should maintain reasonably ample liquidity while keeping leverage stable, the Securities Times said in a front-page commentary. Domestic demand remains weak and export orders may weaken, it said. Smaller businesses' operations are another weak link, as rising commodity prices are affecting downstream and slowing profits, it said. The newspaper commented after the government reported industrial profits rose 7.11% in the first five months, companies' debt ratios continued to decline, while inventories fell, according to the official securities daily.

China's interbank liquidity may remain loose in July as demand will fall after the authorities finish the regular assessment of financial institutions, China Securities said in a report. The central bank is expected to maintain a stable supply of base money, it said. Chinese banks' credit expansions have not been strong as expected, which led to less-than-expected demand for base money and may help bring China government bond rates down by 10-20 bps, the report said. The Chinese yuan may stay at 6.3-6.4 against the U.S. dollar next month, the report noted.

China's cross-border investment and financing are relatively active in both ways and the international balance of payments will continue to maintain a basically balanced pattern, the China Securities Journal said citing Wang Chunying, deputy director of the State Administration of Foreign Exchange. China's investment in overseas securities totaled USD71.7 billion in Q1 while foreign investment in Chinese securities was USD75.2 billion, reflecting that the opening of China's capital market better met the asset allocation needs of both domestic and foreign investors, Wang was cited as saying. Direct investment remained a net inflow of USD75.7 billion, and the current account surplus was 1.8% of GDP, staying in a reasonable range, the newspaper cited Wang as saying.