POLICY: The People's Bank of China (PBOC) will step up prudent monetary policy's support to the real economy, especially for industries and small businesses hit hard by the pandemic, according to a statement released on Tuesday. Recent financial market volatility is driven by investor expectations and sentiment, but China’s economic fundamentals are sound with great growth potential, the PBOC added.
LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1%. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos 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) fell to 1.6111% from 1.6323% on Monday, Wind Information showed. The overnight repo average increased to 1.3063% from the previous 1.3056%.
YUAN: The currency strengthened to 6.5473 against the dollar from 6.5544 Monday. The PBOC set the dollar-yuan central parity rate higher at 6.5590, compared with 6.4909 set on Monday, marking the biggest daily drop since Aug 13, 2015.
BONDS: The yield on the 10-year China Government Bond was last at 2.8475%, up from Monday's 2.8400%, according to Wind Information.
STOCKS: The Shanghai Composite Index lost 1.44% to 2,886.43 while the CSI300 index fell 0.81% to 3,784.12. The Hang Seng Index gained 0.33% to 19,934.71.
FROM THE PRESS: The PBOC could use more tools to stabilise the yuan after it cut the foreign currency reserve requirement for banks by one percentage point to 8% on Monday, the Securities Daily reported citing Chang Ran, senior researcher of Zhixin Investment Research Institute. The cut is relatively cautious, compared with the two 2-pps hikes last year in response to the strong appreciation of yuan, Chang was cited as saying. The 1pps cut can release about USD10.5 billion of foreign exchange liquidity, which will promote the basic stability of yuan and meet the funding needs of repaying foreign debts, the newspaper said citing analysts.
China should stabilise the economy via employment, taming prices, and ensuring supply, as unexpected changes in domestic and foreign situations have led to renewed downward pressure, Xinhua News Agency reported citing Premier Li Keqiang speaking at a work conference on Monday. Policies have already been announced should be implemented as soon as in H1 to help offset severe challenges, while local governments should shoulder the responsibility of safeguarding food and energy security as well as stabilising the industrial and supply chains, Xinhua cited Li as saying.
The A-share market may fall further in the short-term amid epidemic outbreaks and U.S. tightening expectations before the Fed rate meeting in May, the Securities Times reported citing analysts. Some listed companies or important shareholders have repurchased and increased their holdings to buoy sluggish stock prices, while more than 2,500 stocks dropped over 8% on Monday with the Shanghai Composite Index down 5.13%, the biggest one-day drop in more than two years, the newspaper said.