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EXCLUSIVE: China's surprisingly robust September import data was driven partly by panic buying of chips containing U.S. technology and increased purchases under the two countries' trade deal, so may not be sustainable in months ahead, particularly given uncertainties about the Covid-19 pandemic and the U.S. presidential election, policy advisors told MNI.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY50 billion via 7-day reverse repos with the rate unchanged on Friday. This resulted in a net drain of CNY150 billion given the maturity of CNY200 billion of medium-term lending facilities, according to Wind Information. The operation aims to keep the liquidity in the banking system ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.2770% from Thursday's close of 2.2047%, Wind Information showed. The overnight repo average rose to 2.1246% from the previous 1.7920%.
YUAN: The currency strengthened to 6.6982 against the dollar from 6.7300 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 6.7332, compared with 6.7374 on Thursday.
BONDS: The yield on 10-year China Government Bond was last at 3.1125%, down from the close of 3.1300% on Thusday, according to Wind Information.
STOCKS: The Shanghai Composite Index gained 2.07% to 3338.09, while the CSI300 index increased 2.25% to 4,737.09 as financial companies led the surge for today. Hang Seng Index rose 0.47% to 24,455.41.
FROM THE PRESS: Loose monetary policy in China' may have reached its highest point in September and policymakers are likely to further "control the rhythm" to prevent excessive stimulation as exports remain vibrant, consumption recovers and state-led investments take effect, the 21st Century Business Herald said in a commentary. The rise in macro-leverage ratios in the first half was phasic and is likely to decline as the economy expands, the newspaper said. The bond and equity markets are taking a greater share of the real economy's need for capital, it said.
The PBOC is likely to maintain the current MLF operating rate to the end of the year to allow controlled liquidity and also account for potential growth in Q4 and Q1 2021, the China Securities Journal reported citing Yan Se, an economist from Founder Securities. China is likely to expand its fiscal expenditure in the next two months to improve liquidity, and the probability of rate or RRR reductions are small given the current level of inflation, the Journal reporting citing Wen Bin, a researcher from China Minsheng Bank. The MLF renewals will likely carry a stable long-term interest rate to reduce financing costs and support the real economy, said Wen.
China's domestic demand is steadily recovering with the core CPI rising for two consecutive months, the Shanghai Securities News reported citing analysts. Core CPI, which excludes food and energy prices, rose for the second month by 0.2% m/m in September, the fastest since the outbreak of the epidemic, confirming the continued improvement of terminal demand, the newspaper said citing Zhu Jianfang, chief economist of CITIC Securities. China's overall CPI slowed to 1.7% y/y from 2.4% in August, though the indicator is heavily weighted with food items including pork.
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