POLICY: Beijing traders and analysts anticipate the People’s Bank of China (PBOC) is likely to stay on the sidelines should the yuan, largely stable against most other currencies, drift steadily below the key 7.0 level to the U.S. dollar - unless the authorities see clear one-way sentiment and shorting of the yuan building.
POLICY: China opposes any U.S. abuse of export controls and Beijing will take necessary measures to safeguard the legitimate rights and interests of Chinese enterprises, Shu Jueting, spokeswoman of the Ministry of Commerce, said at a briefing.
LIQUIDITY: The PBOC injected CNY2 billion via 7-day reverse repos with the rate unchanged at 2.0%. This keeps the liquidity unchanged after offsetting the maturity of CNY2 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.4512% from 1.3747% on Thursday, Wind Information showed. The overnight repo average rose to 1.1583% from the previous 1.1218%.
YUAN: The currency strengthened to 6.8503 against the dollar from 6.8535 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 6.8536, compared with 6.8388 set on Wednesday, marking the weakest fixing in two years since Aug 31, 2020.
BONDS: The yield on 10-year China Government Bond was last at 2.6580%, up from Thursday's close of 2.6350%, according to Wind Information.
STOCKS: The Shanghai Composite Index rose 0.97% to 3,246.25 while the CSI300 index gained 0.83% to 4,116.24. Hang Seng Index rallied 3.63% to 19,968.38.
FROM THE PRESS: China will increase policy banks' quota of financial instruments by more than CNY300 billion and allow local governments to issue an additional CNY500 billion of investment project-backed special bonds by the end of October, with policymakers looking to promote investment and consumption in a bid to stabilize economic growth, according to a statement on the government's website following the State Council executive meeting chaired by Premier Li Keqiang on Wednesday. It also gave a green light for central power generation enterprises to issue CNY200 billion of bonds in order to guarantee energy supply, as well as allocating CNY10 billion to help rice farmers cope with drought, the statement said.
Money market interest rates will gradually move higher, closing the gap with the 7-day reverse repo rate (which currently stands at 2.00%), after the PBOC conducted a partial roll over of the maturing Medium-term Lending Facility on Aug 15, draining liquidity, the Shanghai Securities News reported, citing analysts. The DR007 rate, which hovered around 1.30% in the first half of August, has climbed for a few days, briefly rising above 1.40%, while the DR001 rate has also edged higher, moving away from the 1.00% area that it operated in for around half a month. The PBOC may continue to drain medium- and long-term liquidity with less MLF rollovers in the coming months, in a bid to guide money market rates closer to the policy rate, the newspaper said, citing Ming Ming, chief economist of CITIC Securities.
The bond financing channels for private property developers are gradually recovering, with more developers planning to issue bonds aided by credit enhancement support from China Bond Insurance, the Securities Times reported, citing industry insiders. Private developers’ difficulty when it comes to issuing bonds overseas has further aggravated repayment pressures, while promoting their bond financing with a full guarantee from credit enhancement firms will help improve cash flows and boost market confidence, the newspaper noted, citing an unnamed insider. On Tuesday, the first fully-guaranteed private developer bond was issued by Chongqing Longhu Enterprise Development, totaling CNY1.5 billion, with the company aiming to repurchase or repay overseas dollar bonds, the newspaper said.
