MNI China Daily Summary: Monday, April 25

TOP NEWS: Chinese stock indexes led regional and global losses, as markets fell sharply on Monday following a sell-off on Wall Street on Friday, with a wider spread of the Covid-19 epidemic in Beijing during the weekend adding to the negative sentiment. The Shanghai Composite Index declined 5.13% to 2,928.51, while the CSI300 index tumbled 4.94% to 3,814.91. Hong Kong's Hang Seng Index lost 3.73% to 19,869.34.

LIQUIDITY: The People's Bank of China (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 25 bps cut to banks' reserve requirement ratio announced on April 15 takes effect today, releasing about CNY530 billion of long-term funds, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.6323% from 1.7518% on Friday, Wind Information showed. The overnight repo average increased to 1.3056% from the previous 1.3026%.

YUAN: The currency weakened to 6.5544 against the dollar from 6.4875 on Friday. The PBOC set the dollar-yuan central parity rate higher at 6.4909, compared with 6.4596 set on Friday, marking the lowest parity since Aug 23, 2021.

BONDS: The yield on 10-year China Government Bond was last at 2.8400%, down from Sunday's close of 2.8600%, according to Wind Information.

FROM THE PRESS: The yuan will regain support with foreign capital returning should China successfully contain the epidemic and implement more precise and effective ways to manage the outbreak and introduces pro-growth policies soon to restore market confidence, wrote Guan Tao, former forex official and chief economist at BOC Securities in an article published on Yicai.com. The recent depreciation of the yuan was due to a correction amid the spillover risk of Russia-Ukraine conflicts, greater regulatory oversight of China's U.S.-listed overseas companies and a sharp rebound of local Covid-19 cases, said Guan. Guan dismissed the speculation that the central bank has intervened by setting the central parity weaker. The recent weakening of the yuan will help release some pressure to depreciate as the U.S. Federal Reserve tightens its policies, Guan said.

China should take more vigorous macro policies to hedge the impact of the Covid-19 epidemic and keep economic growth in Q2 above 5% to ensure the 5.5% growth target for this year can be achieved, Cls.cn reported citing Wang Yiming, member of the People’s Bank of China’s Monetary Policy Committee. Authorities should quickly control the epidemic by early May, Wang said. The priorities are to actively expand domestic demand, boost consumption, as well as safeguard the supply chain to stabilize market expectations, Wang was cited as saying.

Beijing city is on high Covid-19 alert after recording 41 new cases in the past three days with cases detected in five districts, the China News Service reported on Sunday citing Pang Xinghua, deputy director of Beijing Center for Disease Control and Prevention. Health officials said on the weekend that the epidemic may have been spreading unnoticed for a week, with those infected found among a school, a tour group, and many families, while more cases are expected to be detected as mass testing gets underway, according to the newspaper.