MNI China Daily Summary: Thursday, January 20

TOP NEWS: The People's Bank of China (PBOC) cut its 1-year and 5-year benchmark Loan Prime Rates (LPR) by 10 basis and 5 basis points on Thursday, a move largely expected by the market following another key rate cut on Monday and on the heels of bank officials’ pledge to ramp up lending and revive a flagging economy. After the cuts, the 1-year and 5-year LPR now sit at 3.70% and 4.60%, according to a statement on the central bank's website.

LIQUIDITY: The PBOC injected CNY100 billion via 7-day reverse repos with the rate unchanged at 2.1%. The operation has led to a net injection of CNY90 billion after offsetting the maturity of CNY10 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) decreased to 2.1104% from 2.1135% on Wednesday, Wind Information showed. The overnight repo average rose to 2.0441% from the previous 2.0400%.

YUAN: The currency strengthened to 6.3421 against the dollar from 6.3522 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.3485, compared with 6.3624 set on Wednesday.

BONDS: The yield on 10-year China Government Bond was last at 2.7675%, down from Wednesday's close of 2.7750%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.09% to 3,555.06, while the CSI300 index increased 0.90% to 4,823.51. Hang Seng Index rallied 3.42% to 24,952.35.

FROM THE PRESS: The PBOC is likely to further cut banks’ reserve requirement ratios in Q1 after the authorities hinted that there is room for RRR cut, China Securities Journal reported citing analysts. At least one RRR cut is required as banks’ reserve accounts will need to increase by CNY1.5 trillion in 2022 along with growing deposits, and conducting MLFs alone will not be enough, the newspaper said citing analyst Xie Yunliang with Cinda Securities. Following recent rate cuts, RRR cuts can help fill the liquidity gap amid the Spring Festival starting at the end of January, tax season and local government special bond issuance, the newspaper said citing Huang Wentao, chief economist of CSC Financial.

Chinese authorities should guide Internet platforms toward orderly open ecosystems and closer cooperation, and make the industry more innovative and empowering beyond online purchases and bicycle sharing, the Economic Daily said in an editorial referring to new rules on the country’s largest E-merchants, such as Alibaba and Tencent. Rather than limiting and attacking platform-based economy, the government has focused on strengthening anti-monopoly rules, closer supervision of finance, data and algorithms, the editorial said. Platforms should increase investments in innovation and help modernize manufacturing and agriculture while boosting internal demand, it said.

Listed real estate companies in China have increased financing activities significantly with lower costs and large amount, mainly to add liquidity, restructure or repay debts and invest in new projects, China Securities Journal reported. Most financing interest rates are kept within 5%, the newspaper said. The real estate market has gradually stabilized at the bottom as developers’ financing condition improved amid eased regulations, and developers increased bids for land in recent auctions, the newspaper said citing Zhang Dawei, chief analyst of Centaline Property.