MNI China Daily Summary: Wednesday, September 30

POLICY: Chinese regulators have given companies wider channels for selling bonds and equities and courting foreign investors to facilitate capital raising as part of the reform of the financial markets, officials told reporters Tuesday in a briefing at the People's Bank of China (PBOC). Promotions of new tools, such as asset-backed medium-term notes and asset-backed commercial paper, resulted in 40% more capital totaling CNY6.07 trillion raised in the first eight months of 2020 compared with the same period last year, according to Cao Yuanyuan, the deputy secretary-general of National Association of Financial Market Institutional Investors.

DATA: China's manufacturing Purchasing Manager Index (PMI) registered 51.5 in September, standing above the breakeven 50 for the seventh month following the 51.0 recorded in August. The non-manufacturing PMI read at 55.9, up from the previous 55.2. Both indices reflected the country's steady recovery from the pandemic, the latest data from the National Bureau of Statistics released on Wednesday showed.

LIQUIDITY: The PBOC is keeping liquidity stable across the interbank market in coming weeks, maintaining a "reasonable and ample" level as it continues to support the real economy through steady policy measures, the latest MNI Liquidity Conditions Index shows. The Liquidity Condition Index slid to 75.0 in September from August's 7-month high 84.4, with 18.8% respondents reporting easier liquidity conditions from last month.

LIQUIDITY: The PBOC injected CNY50 billion via 14-day reverse repos with the rate unchanged at 2.35%. This resulted in a net drain of CNY50 billion given the maturity of CNY100 billion of reverse repos, according to Wind Information. The operation aims to keep liquidity stable at the end of the quarter, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.4483% from Tuesday's close of 2.3907%, Wind Information showed. The overnight repo average rose to 2.3785% from the previous 0.8947%.

YUAN: The currency strengthened to 6.8106 against the dollar from 6.8229 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 6.8101, compared with Tuesday's 6.8171.

BONDS: The yield on 10-year China Government Bond was last at 3.1450%, up from Tuesday's 3.1250%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.20% to 3,218.05, while the CSI300 index decreased 0.10% to 4,587.40. Hang Seng Index edged up 0.79% to 23,459.05 .

FROM THE PRESS: The PBOC may still make selected cuts to reserve requirement ratios this year, though a broad RRR cut is less likely, the Securities Daily reported citing Zhang Wei, the chief researcher of Kunlun Health Insurance. Monetary policy in Q4 will further strengthen targeted moves to ensure new financing mainly goes to manufacturers, private and small companies, while continuing with the tone of increasing efficiency and flexibility, the newspaper cited analysts following the Q3 meeting of the central banks' monetary policy committee. The PBOC may focus on precise injections and the strict supervision of funds, and not divert funds to the capital and real estate markets in the future, Zhang told the Daily.

China is likely to achieve annual growth of 2% on signs of a stronger than expected economic recovery, including 19.1% y/y growth in profits by industrial enterprises in August, Cao Heping, a professor from Peking University's School of Economics, wrote on Wednesday in a Global Times commentary. The recovery is being supported by improving consumption in areas such as transportation, entertainment and travel, which reflects more consumer confidence compared to sectors such as real estate and automobile sales, wrote Cao. Spending by students may also rebound as schools resume in September, Cao wrote. The sustainable special bond release program and the beginning of work on multiple infrastructure projects has also been positive for the recovery.