MNI China Daily Summary: Monday, July 24

POLUCY: China will take measures to boost private investment in public projects, according to Luo Guosan, director at the National Development and Reform Commission (NDRC).

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY14 billion via 7-day reverse repos with the rates at 1.90%. The operation has led to a net drain of CNY19 billion after offsetting the maturity of CNY33 billion reverse repo today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.7684% from 1.8116%, Wind Information showed. The overnight repo average increased to 1.5288% from 1.5233%.

YUAN: The currency weakened to 7.2031 against the dollar from previous close of 7.1790. The PBOC set the dollar-yuan central parity rate lower at 7.1451, compared with 7.1456 set on Friday. The fixing was estimated at 7.1749 by BBG survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6650%, down from 2.6750% at previous close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.11% to 3,164.16, while the CSI300 fell 0.44% to 3,805.22. The Hang Seng Index was down 2.13% to 18,668.15.

FROM THE PRESS: The PBOC may cut the reserve requirement ratio in Q3 to offset the maturity of medium-term lending facilities and maintain reasonable medium to long-term liquidity, said Lian Ping, chief economist and dean at Zhixin Investment Research Institute. In H2, the PBOC may moderately lower the interest rate of structural monetary tools such as relending to support agriculture and small businesses, said Lian. The possibility of a small rate cut in Q4 cannot be ruled out after the U.S. Federal Reserve finishes its rate-hike process, said Lian. (Source: China Securities Journal)

China will advance the transformation of villages in super-large and mega cities, expected to drive an investment over CNY1 trillion, according to a report by Sinolink Securities. The State Council executive meeting last week said the steady promotion of the renovation of these villages is a significant move to improve people's livelihoods, expand domestic demand and promote high-quality urban development. The first-tier Guangzhou city plans to complete CNY200 billion of investment in urban renewal this year, a rise of 60% y/y, the report said. From 2020-2022, the market size of national urban village renovation was CNY1.24 trillion, CNY1.36 trillion and CNY655.9 billion, the report said. (Source: China Securities Journal)

The average interest rate of first and second house mortgages in 100 key cities was 3.9% and 4.81% in July, falling 45bp and 25bp from the same period last year, according to data by Beike Research Institute. With the rate of new mortgages continuing to fall, the rate of outstanding mortgages may also be lowered following the central bank’s call. Any plan to lower the rate should be customised by commercial banks and authorities should adopt certain incentive measures to hedge the negative impact of reduced interest income of commercial banks. (Source: 21st Century Business Herald)