MNI China Daily Summary: Monday, October 21
EXCLUSIVE: The People's Bank of China could reduce the reserve requirement ratio by 25-50 basis points later this year to support the government’s 5% annual GDP growth target, following Monday’s 25bp reduction to the loan prime rate, but will likely hold off on further policy adjustment this year as it observes the economy.
BRIEF: Beijing wants the SWIFT payment system to improve compliance and localised services while maintaining its importance in China, which will continue to embrace opening of its financial sector, said Lu Lei, deputy-governor of the PBOC, at the Sibos 2024 forum in Beijing.
BRIEF: China invested CNY398.2 billion in its domestic power grid between January and September, up 21.1% y/y, according to data released by the National Energy Administration.
BRIEF: China's Loan Prime Rate fell 25 basis points on Monday according to a PBOC statement, an expected move after the central bank cut the 7-day reverse repo rate by 20bp last month.
LIQUIDITY: The PBOC conducted CNY208.9 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY166.2 billion after offsetting the maturity of CNY42.7 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.6277% from 1.6065%, Wind Information showed. The overnight repo average increased to 1.4758% from 1.4037%.
YUAN: The currency weakened to 7.1118 against the dollar from 7.0676 on Friday. The PBOC set the dollar-yuan central parity rate lower at 7.0982, compared with 7.1035 set on Friday. The fixing was estimated at 7.0985 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 2.0800%, up from the previous close of 2.0600%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index rose 0.20% to 3,268.11 while the CSI300 index gained 0.25% to 3,935.20. The Hang Seng Index fell 1.57% to 20,478.46.
FROM THE PRESS: The China Securities Regulatory Commission appreciates the current positive market momentum and will take measures to further stabilise expectations and strengthen confidence, Commission representatives said at a recent symposium, the Securities Times has reported. Authorities need to promote more high-quality tech firms to go public, facilitate mergers and reorganisations, normalise IPOs, cultivate patient capital and guide medium- and long-term funds into the market. Additionally, the government should deepen law-based market reforms, improve expectation management, and guide rational and value based investment, the newspaper said.
A total of 23 listed companies have disclosed plans to repurchase or increase stock holdings under the central banks’ relending programme so far, with funds likely to reach CNY11 billion, The Paper reported. The companies, or their controlling shareholders, have signed loan agreements or obtained loan commitment letters with a total of six banks, the newspaper said. Analysts noted firms with a dividend rate equal to or above the 2.25% upper limit of banks’ loan interest rate will have enthusiasm for the programme, the newspaper said.
China’s banking sector performance shows regional disparities are widening, with the NPL ratio notably increasing in some central and western provinces, a report from the China Banking Association has said. However, the report highlighted overall commercial banks’ non-performing loan ratio reached 1.56% by the end of June, down 0.06 percentage points from the same period in 2023, and the lowest level since 2016. The report noted downward pressure on retail loan asset quality was more obvious than with corporate loans. (Source: Yicai)