MNI China Daily Summary: Monday, September 28

LIQUIDITY: The People's Bank of China (PBOC) injected CNY40 billion via 14-day reverse repos with the rate unchanged at 2.35% on Monday. This resulted in a net drain of CNY60 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 2.2536% from last Sunday's close of 1.9325%, Wind Information showed. The overnight repo average fell to 0.5965% from the previous 0.6667%.

YUAN: The currency weakened to 6.8209 against the dollar from 6.8202 on last Friday. The PBOC set the dollar-yuan central parity rate higher for a sixth trading day at 6.8252, compared with Friday's 6.8121.

BONDS: The yield on 10-year China Government Bond was last at 3.1050%, down from the close of 3.1324% on Sunday, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 0.06% to 3,217.53, while the CSI300 index increased 0.26% to 4,581.91. Hang Seng Index rallied 1.04% to 2,3476.05.

FROM THE PRESS: China's monetary policy will remain stable and the PBOC is unlikely to cut banks' reserve requirement ratios or interest rates barring a major external shock, the Economic Information Daily reported citing Wang Qing, chief analyst at Golden Credit Rating. The PBOC may choose to inject medium and long-term liquidity by rolling over the matured MLFs in excess of the required amount, Wang said. However, he told the Daily that longer-term liquidity continues to be tight as banks are tasked to reduce structural deposits.

The inclusion of China in the World Government Bond Index is expected to attract USD120-150 billion of capital inflows into the Chinese bond market in the next 18-24 months, the Securities Daily reported citing market sources. China's high risk-free interest rate, combined with its restrained monetary policies, are attracting investment in the country's securities market from foreign institutional investors, reaching a historical high of USD101.1 billion in the first seven months, up 68% y/y, according to the Daily. China will continue to push for the two-way opening of capital accounts and the internationalization of the yuan, the Daily said.

China will promote strategic mergers and reorganizations of both SOEs and private enterprises to optimize the market structure and the supply and industrial chains, the Shanghai Securities News reported on Monday citing Vice premier Liu He. Speaking on a three-year campaign to reform SOEs, Liu said SOEs should increase their efficiency and innovation skills to become competitive and better serve the state-owned economy. State-owned capital should focus on sectors which concern national security, public services and other national economic lifelines and become the fundamental force in resisting macro risks, said Liu.

China's tourism industry is recovering rapidly from the pandemic with over 75% of travel agencies back in operation by mid-September, the People's Daily reported citing Shan Gangxin, an official at the Ministry of Culture and Tourism. By mid-September, both group tours and orders through online travel platforms have recovered to around 40% of the level at the same period last year, while up to 91% of established hotels have reopened, the Daily said.