MNI China Daily Summary: Monday, May 13

POLICY: China’s Ministry of Finance published its 2024 schedule for issuing general treasury and ultra-long-term special treasury bonds.

LIQUIDITY: The PBOC conducted CNY2 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to no change to the liquidity after offsetting the CNY2 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.8485% from 1.8520%, Wind Information showed. The overnight repo average increased to 1.7806% from 1.7268%.

YUAN: The currency weakened to 7.2347 against the dollar from previous close of 7.2246. The PBOC set the dollar-yuan central parity rate lower at 7.1030, compared with 7.1011 set on Friday.

BONDS: The yield on 10-year China Government Bonds was last at 2.3225%, down from 2.3600% at the previous close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.21% to 3,148.02 while the CSI300 decreased 0.04% to 3,664.69. The Hang Seng Index rose 0.80% to 19,115.06.

FROM THE PRESS: The deceleration of M2 money supply growth was mainly driven by residents' increasing enthusiasm for buying financial management products which have diverted bank deposits, and also reduced the need for non-bank institutions to borrow from banks, Yicai.com reported citing Zhang Yu, chief macro analyst at Huachuang Securities. More than CNY2 trillion of companies’ and residents’ deposits were diverted to asset-management products in April from March, an unnamed source said. Meanwhile, a considerable number of inflated and irregular deposits and loans have been reduced amid tightening regulations, which also slowed down M2 growth to 7.2% y/y in April from March’s 8.3%, Zhang noted.

China’s asset prices are expected to be fully restored as various funds rush to allocate to Chinese stocks, Shanghai Securities News reported. Active private equity positions have rapidly increased to 76% from 65% since end-March, while northbound funds have flowed in rapidly with a net of CNY32.9 billion since April 22 mainly to the banking, food and beverage, nonferrous metals, pharmaceuticals and basic chemicals sectors, according to CITIC Securities. However, analysts from Soochow Securities argued that the entry of larger-scale and longer-term funds into the market requires a more solid turnaround of economic fundamentals.

The EU will be less likely to take protectionist measures against China given Germany’s strong economic relationship with Beijing, according to Zhu Ying, professor of economics at Shanghai Normal University. Germany plays a special role in China's economy and trade relations, with about 5,000 firms operating in the country, Zhu added. Automakers from Germany are increasingly relying on Chinese teams for R&D in areas such as autonomous driving, where Europe is not advanced. (Source: Yicai)