MNI China Daily Summary: Monday, July 1

     DATA: The Caixin China manufacturing Purchasing Managers Index (PMI)

declined to 49.4 in June from May's 50.2, falling into contraction, or below 50,

for the first time in four months. The decline indicated a marginal

deterioration in activities of small and medium-sized manufacturers, according

to Caixin. New orders index on future activity levels slid below the breakeven

50. Export orders index slid back into below 05 after a rebound in May, Caixin

said.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

(OMOs) for a sixth day, resulting in a net drain of CNY150 billion as the same

amount of reverse repos matured, according to Wind Information. Total liquidity

in the banking system is at a relatively high level, enough to offset the

maturity of reverse repos and government bond issuance, according to the PBOC.

     RATES: The 7-day weighted average interbank repo rate for depository

institutions (DR007) fell to 2.2140% from Friday's close of 2.5636%, Wind

Information showed. The overnight repo average decreased to 1.0600% from

Friday's 1.3864%.

     YUAN: The yuan strengthened to 6.8444 from Friday's close of 6.8747. The

PBOC set the dollar-yuan central parity rate stronger at 6.8716 today, compared

with 6.8747 set last Friday. 

     BONDS: The yield on the 10-year China Government Bond was last at 3.2450%,

down from Friday's close of 3.2500%, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index increased 2.22% to 3,044.90,

hitting a two-month high, driven up by the rally of OLED, 5G, fuel cell, and

liquor shares, according to Wind Information. Hong Kong's Hang Seng Index fell

0.28% to 28,542.62.

     FROM THE PRESS: China's perseverance in fighting against U.S. trade

bullying over the last few months had been key to the deadlock-breaking

agreement between Presidents Xi Jinping and Donald Trump at the G20 summit, and

it must stay strong to achieve a fair deal, the Global Times said in an

editorial late Sunday. China is prepared for uncertainties in future trade

talks, while the Trump administration has repeatedly contradicted itself, the

newspaper said.

     The latest version of China's list banning areas for foreign investors has

been shortened to 40 items from 48, according to a statement released by the

National Development and Reform Commission and the Ministry of Commerce on

Sunday. The new policy relaxed access to investing in gas utilities, cinemas,

telecommunications, petroleum, as well as the agricultural, mining and

manufacturing sectors, the ministries said.

     The PBOC is unlikely to inject liquidity by OMOs at the beginning of this

month given ample liquidity levels in the banking system and lenders' relatively

high excess reserve ratios, the China Securities Journal reported today citing

unnamed analysts. 

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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