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Free AccessMNI China Daily Summary: Monday, June 17
DATA: China's consumption rebounded to mark the quickest growth since February thanks to the week-long May Day holiday, but industrial output and investment both slowed more than expected, data released by the National Bureau of Statistics showed. Retail sales grew 3.7% y/y in May to hit a three-month high. The figure rose from the previous 2.3% gain and outpaced the 2.8% forecast. Industrial production rose 5.6% y/y in May, decelerating from April's 6.7% growth and underperforming the expected 5.9%. Fixed-asset investment registered a 4.0% y/y increase, moderating from the 4.2% growth over the Jan-Apr period and missing the 4.2% consensus.
POLICY: China’s consumer market can continue accelerating following retail sales growing by 3.7% y/y in May to hit a three-month high, Liu Aihua, NBS spokesperson said. Speaking to reporters, Liu said consumer demand will benefit from authorities implementing the trade-in policy for durable consumer goods, with growth seen in digital, health, and green consumption.
POLICY: China has launched an anti-dumping investigation into pork imports from the European Union after the bloc announced new tariffs on Chinese electric vehicles Wednesday.
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY182 billion one-year MLF and CNY4 billion via 7-day reverse repo, with the rates unchanged at 2.50% and 1.80%, respectively. The operation has led to a net drain of CNY51 after offsetting the CNY237 billion maturity of MLF today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.8649% from 1.8198%, Wind Information showed. The overnight repo average increased to 1.7992% from 1.7441%.
YUAN: The currency weakened to 7.2559 against the dollar from 7.2557 on Friday. The PBOC set the dollar-yuan central parity rate lower at 7.1149 on Monday, compared with 7.1151 set on Friday. The fixing was estimated at 7.2568 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bond was last at 2.2580%, down from the previous close of 2.2625%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index fell 0.55% to 3,015.89 while the CSI300 index lost 0.15% to 3,536.20. The Hang Seng Index edged down 0.03% to 17,936.12.
FROM THE PRESS: The People’s Bank of China has repeatedly expressed concern about declining long-term treasury bond yields, while it still has room for conventional monetary-policy tools, including the purchase and sale of treasury bonds, Securities Daily reported citing analysts. The recent issuance of 50-year ultra-long-term special treasury bonds drove the coupon rate down to 2.53%, lower than that of the previously issued 2.57% 30-year bonds. The inversion sparked discussion about whether the PBOC would sell some of its longer-term bond holdings to curb the bull bond market.
The rebound of the M1 money supply, which fell further by 4.2% y/y in May, depends on home sales, fiscal spending and exporters’ settlement, Shanghai Securities News reported citing Liu Lu, chief fixed-income analyst at Ping An Securities. Some current deposits were diverted to the financial management market as deposit rates declined, while the central bank’s effort to crack down on irregular deposits also decelerated M1, the newspaper said. Meanwhile, China’s M1 calculation, which only includes cash and corporate demand deposits, should be expanded to include residents’ monetary funds and financial products that can be redeemed at any time, the newspaper added.
Major foreign institutional investors are increasing their positions in A-shares and Hong Kong stocks as they bet on quickening economic recovery in H2, Shanghai Securities News reported. As of June 12, northbound funds have made a cumulative net purchase of CNY77.5 billion this year, far exceeding the net purchase amount of CNY43.7 billion in 2023. The electronics, non-ferrous metals and banking sectors have all received more than CNY10 billion inflows in Q2, while further investment opportunities may focus on artificial intelligence, high-end manufacturing and the real-estate sector, the newspaper said.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.