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POLICY: Increases in liquidity injections are expected from the People’s Bank of China (PBOC) in the next few months as the government accelerates debt issuance to shore up the economy, which would boost China’s aggregate financing and M2, according to market analysts and economists.
POLICY: China’s consumer prices are expected to have accelerated only slightly in May as food prices were tamed by sufficient supply and services remained muted amid the pandemic lockdowns. Factory-gate inflation likely eased on the base effect and weaker demand, according to analysts. Median forecasts for Friday's prices data anticipated CPI rising 2.2% y/y, up from April’s 2.1% gain, while PPI was expected to have risen 6.5% y/y, decelerating from the previous 8.0%.
POLICY: China noted the recent comments from the U.S. that suggest a consideration of lifting the additional tariffs imposed on Chinese goods since start of the 2018 trade war, and Beijing still aims for the cancellation of all additional tariffs, Shu Jueting, spokeswoman of the Ministry of Commerce, said at a briefing.
DATA: China's foreign trade surged in May as lockdowns eased in major cities, with exports jumping 16.9% on a yearly basis while imports rose 4.1%, data from China Customs showed. Exports reached USD308.25 billion in May, marking the fastest growth so far this year. Imports rose from two previous months of a flat reading.
LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1%. This keeps the liquidity unchanged 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 1.6154% from 1.6218% on Wednesday, Wind Information showed. The overnight repo average fell to 1.4092% from the previous 1.4150%.
YUAN: The currency weakened to 6.6837 against the dollar from 6.6830 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 6.6811, compared with 6.6634 set on Wednesday.
BONDS: The yield on 10-year China Government Bond was last at 2.8000%, down from the previous close of 2.8075%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.76% to 3,238.95, while the CSI300 index lost 1.05% to 4,175.67. Hang Seng Index fell 0.66% to 21,869.05.
FROM THE PRESS: Local governments must urgently refine and implement pro-growth policies to ensure reasonable economic growth in the second quarter, in the face of still prominent downward pressure, according to a statement on a government website following a State Council executive meeting chaired by Premier Li Keqiang late Wednesday. It is necessary to further expand opening up and stabilising foreign investment and trade to promote employment, the meeting said. The government will study a phased reduction or exemption of port-related charges and faster customs clearance and port efficiency to help stabilise international supply chains, the meeting said.
The yuan is likely to stay around the 6.68 level against the U.S. dollar by the end of June, compared to Wednesday’s closing price of 6.6830, Yicai.com reported citing its survey of economists. The economists raised their forecast for the yuan-dollar exchange rate by year-end to 6.63 from a previous 6.67 forecast made last month, Yicai said. The yuan remained relatively strong against the yen, euro and pound, though weakening against the dollar recently. Allowing a more flexible yuan will provide room for monetary policy to stabilise economic growth, said Yicai citing Xu Sitao, chief economist at Deloitte China.
Potential homebuyers remain cautious despite eased rules and lower mortgage interest rates in over 100 cities to prop up the market, the Securities Times reported. The total transaction volume of second-hand housing in first-tier city Shenzhen in the first five months of this year was equivalent to a single month in 2020 when the market thrived, the newspaper said citing an unnamed sales manager. Policies should focus on reducing the cost of the entire supply chain and restoring developers’ credit, given that it is hard to stimulate demand when buyers are afraid of increasing leverage amid uncertain income expectations, the newspaper said citing analysts.
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