MNI China Daily Summary: Thursday, August 24

EXCLUSIVE: The People’s Bank of China (PBOC) faces a tough job to defend the yuan at 7.30 to the dollar as the Chinese economy remains sluggish and the Federal Reserve keeps monetary policy tight, policy advisors and FX traders told MNI, though they added that despite possible further short-term weakness the currency could still strengthen towards the end of the year.

LIQUIDITY: The PBOC conducted CNY61 billion in 7-day reverse repos, with rates unchanged at 1.80%. The operation led to a net drain of CNY107 billion after offsetting maturities of CNY168 billion, 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 1.7819% from 1.8025%, Wind Information showed. The overnight repo average decreased to 1.5791% from 1.7436%.

YUAN: The currency strengthened to 7.2777 to the dollar from 7.2923 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 7.1886, compared with 7.1988 on Wednesday. The fixing was estimated at 7.2812 in a Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6050%, up from Wednesday's close of 2.6025%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.12% to 3,082.24 while the CSI300 index increased 0.72% to 3,723.43. The Hang Seng Index was up 2.05% to 18,212.17.

FROM THE PRESS: The People’s Bank of China will likely inject liquidity via large-scale reverse repo operations, as the issuance of government bonds will remain high for the rest of the month and banks continue to increase credit supply, said Feng Lin, analyst at Golden Credit Rating. Since Aug 15, the PBOC has injected a net of CNY691 billion via reverse repo, maintaining a high pace of injections even after the tax payment peak. The daily average of DR007 was 1.88% from Aug 15-22, higher than the seven-day reverse repo rate of 1.8%, indicating relatively tight liquidity. (Source: Securities Daily)

China’s top securities regulator will support overseas listing channels for mainland firms in Hong Kong and facilitate the entry of medium- and long-term funds into the market, according to Li Chao, vice chairman at the China Securities Regulatory Commission. Li said in a recent speech that authorities will support the introduction of treasury bond futures trading in Hong Kong and enhance the city's position as a risk management and international financial centre. (Source: Yicai)

BRICS nations should oppose decoupling and economic coercion as the group works towards deeper economic, trade and financial cooperation, according to President Xi Jingping. Speaking at the BRICS summit in South Africa, Xi said the group should promote deeper economic exchanges as the global economic recovery was not stable and growth may be less than 3% this year. The world faces increased uncertainty and instability, and BRICS will focus cooperation on the digital economy, green development, artificial intelligence and vocational training. (Source: Yicai)