MNI China Daily Summary: Monday, January 29

EXCLUSIVE: The People’s Bank of China (PBOC) will likely cut rates for policy tools such as its medium-term lending facilities and 7-day repo by around mid-year, but weak credit demand will divert liquidity released by easing moves – such as last week's reserve requirement ratio cut – to unproductive financial arbitrage, policy advisors and economists told MNI.

LIQUIDITY: The PBOC conducted CNY500 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The reverse repo operation has led to a net injection of CNY378 billion reverse repos after offsetting CNY122 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.9401% from the previous 1.9517%, Wind Information showed. The overnight repo average decreased to 1.7160% from the previous 1.8118%.

YUAN: The currency strengthened to 7.1797 against the dollar from 7.1808 on Friday. The PBOC set the dollar-yuan central parity rate higher at 7.1097 on Monday, compared with 7.1074 set on Friday. The fixing was estimated at 7.1802 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bond was last at 2.4930%, down from the previous close of 2.5010%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.92% to 2,883.36 while the CSI300 index lost 0.90% to 3,303.96. The Hang Seng Index gained 0.78% to 16,077.24.

FROM THE PRESS: Guangzhou city, one of the top four cities in China, has fully relaxed home purchase limits for buyers with local residency. Properties with a floor area of more than 120 sqm are excluded from housing purchase restrictions, according to a notice from the city government on Saturday. For those without local residency, they still need to meet the threshold of providing two-year payment of social security in the city to buy a floor area of less than 120 sqm. Other first-tier cities may follow suit as local authorities attach greater importance to property market stability in the near term, but the downward pressure has not changed significantly since the beginning of 2024, said Li Yujia, chief research fellow at the Guangdong Urban & Rural Planning and Design Institute. (Source: 21st Century Business Herald)

The China Securities Regulatory Commission (CSRC) has suspended the lending of restricted stocks as it seeks to crack down on illegal activities using securities lending to reduce holdings and cash out. The measure, which takes effect Monday, will create a fairer market order and restrict the advantage of some institutions in the use of information and tools, the CSRC notice said. (Source: Yicai)

China signed a mutual visa exemption agreement with Thailand, causing a seven-fold increase in Thailand-related searches on C-trip the following day, according to Yicai. C-trip data shows Chinese passengers increased bookings to Singapore, Malaysia and Thailand 15 times y/y during this year's Spring Festival. Qin Jing, vice president at Ctrip Group, said under the new agreement, which takes effect March 1 and replaces the existing visa free agreement for Chinese passengers, China can attract Thai passengers seeking ice and snow tourism. (Source: Yicai)