MNI China Daily Summary: Friday, September 30

DATA: China's Purchasing Managers' Index (PMI) unexpectedly rebounded to 50.1 in September from 49.4 in August, rising back to the expansionary zone above 50 after contracting for the past two months as pro-growth policies kick in and the impact of heatwaves subsided, data from the National Bureau of Statistics showed.

DATA: China's September Caixin manufacturing PMI fell 1.4 points to 48.1, remaining in the contraction zone below 50 for a second month and falling to a five month low as production and demand weakened on measures to curb renewed Covid-19 outbreaks, the financial publisher said.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY128 billion via 7-day reverse repos and CNY58 billion via 14-day reverse repos with the rates unchanged at 2.00% and 2.15%, respectively. The operations have led to a net injection of CNY184 billion after offsetting the maturity of CNY2 billion reverse repos today, according to Wind Information. The operation aims to keep liquidity stable at quarter-end, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.0919% from 2.1321% on Thursday, Wind Information showed. The overnight repo average rose to 2.0190% from the previous 0.9064%.

YUAN: The currency strengthened to 7.0931 against the dollar from 7.2000 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.0998, compared with 7.1102 set on Thursday.

BONDS: The yield on 10-year China Government Bond was last at 2.7950%, up from Thursday's close of 2.7625%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.55% to 3,024.39 while the CSI300 index edged down 0.58% to 3,804.89. The Hang Seng Index gained 0.33% to 17,222.83.

FROM THE PRESS: Some Chinese cities suffering ongoing declines in home prices have been allowed to temporarily relax the floor on mortgage rates for first home buyers, The Beijing News reported citing a statement on the central bank website. For cities where new home prices posted month-on-month and year-on-year declines between June and August 2022, localities can decide on whether to maintain, lower or scrap the floor on first-home mortgage rates by the end of 2022, the statement said. The current floor rate of 4.1% is expected to be breached and this may trigger a new round of mortgage rate cuts in Q4, the newspaper said citing analysts. Among the 70 key cities monitored by the National Bureau of Statistics, 23 cities, including 8 second-tier and 15 third-tier cities, fit into the new policy, the newspaper said citing E-house China Research and Development Institution.

China’s current account will maintain a reasonably sized surplus and the resilience of the balance of payments will support the stability of the yuan and the foreign exchange market, the Securities Daily reported citing Wang Chunying, deputy director of the State Administration of Foreign Exchange. China’s current account surplus was USD166.4 billion in H1, a rise of 43% y/y, while the direct investment surplus was USD74 billion. Together they delivered a 3% year-on-year increase to relatively high historic levels, the newspaper said. The Chinese market will continue to attract foreign investment, while the stable returns and investment value of yuan assets remain attractive in the long run, the newspaper said citing Wang.

The PBOC will strengthen its counter-cyclical adjustment and increase the intensity of prudent monetary policy via both aggregate and structural tools to stabilize employment, prices and the economy, according to a statement on the PBOC website following the Monetary Policy Committee’s Q3 meeting. The PBOC will deepen the market-based reform of the exchange rate, enhance yuan flexibility and strengthen expectations management to stabilise the yuan at a reasonable and balanced level, the statement said.