MNI China Daily Summary: Monday, June 13

POLICY: China’s prices data came in a bit weaker than expected and suggested room for cuts to the reserve requirement ratio and interest rates in Q3 even with some early signs of an economic rebound underway from sharp lockdown conditions in April, according to analysts.

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 operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.5970% from 1.5728% on Friday, Wind Information showed. The overnight repo average rose to 1.4059% from the previous 1.3971%.

YUAN: The currency weakened to 6.7341 against the dollar from 6.6927 on Friday. The PBOC set the dollar-yuan central parity rate higher at 6.7182, compared with 6.6994 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.8050%, up from the previous close of 2.7925%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.89% to 3,255.55 while the CSI300 index lost 1.17% to 4,189.35. Hang Seng Index tumbled 3.39% to 21,067.58.

FROM THE PRESS: The Chinese economy likely rebounded in May as declines in industrial output and consumption narrowed, Yicai.com reported citing economists. Economists surveyed by Yicai expected industrial output fell 0.49% y/y in May, compared to the 2.9% decline in April, as power consumption by industrial enterprises in Shanghai recovered to 80.5% of the level same period last year while logistics also improved. A decline in consumption likely narrowed to a 7% y/y dip from the previous 11.1% decline, said Yicai citing economists. Fixed-asset investment may remain upbeat, growing about 7.2% amid policy pushes to boost the economy, the newspaper said citing economists. China is set to release its May economic indicators on Wednesday.

Chinese savings deposits have increased significantly since the start of the pandemic more than two years ago, Yicai.com reported. In the first five months of this year, resident deposits increased by CNY7.86 trillion, up 50.6% y/y, compared to the CNY6.15 trillion in the same period of 2020, said Yicai citing data by the central bank. Corporate savings deposits are also rising with funds in their current accounts growing slower than those in their time deposits, as willingness to expand investment has not yet recovered amid high energy and raw material costs and weak demand, the newspaper said citing Wang Yunjin, senior researcher of Zhixin Investment Research Institute.

Leading indicators signal that the resumption of work and production in Shanghai and the whole Yangtze River Delta Economic Zone has accelerated after a two-month Covid-19 lockdown, CCTV news reported. An estimated 96% of 9,472 industrial enterprises in Shanghai have reopened so far, with their production capacity reaching 69%, CCTV said. The production capacity of key integrated circuit companies in Shanghai is above 90%, while the production of automobiles reached 70,000 units in May, more than tripling from April, CCTV said.