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POLICY: China’s consumer prices will remain within a reasonable range, with the annual index able to fall within the 3% ceiling, as domestic food supply is sufficient and logistics improve, said Meng Wei, spokeswoman of the National Development and Reform Commission at a briefing. China’s PPI gain is expected to further slow down, as the country is self-sufficient in grain production and coal resources with policies to ensure supply and stabilise prices, said Meng.
LIQUIDITY: The People's Bank of China (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 1.6148% from 1.6162% on Wednesday, Wind Information showed. The overnight repo average fell to 1.4106% from the previous 1.4116%.
YUAN: The currency strengthened to 6.7162 against the dollar from 6.7195 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.7099, compared with 6.7518 set on Wednesday.
BONDS: The yield on 10-year China Government Bond was last at 2.8130%, down from the previous close of 2.8190%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.61% to 3,285.38, while the CSI300 index lost 0.66% to 4,250.06. Hang Seng Index tumbled 2.17% to 20,845.43.
FROM THE PRESS: The PBOC is likely to keep the benchmark Loan Prime Rate unchanged next Monday, after it skipped moving the anchored rate of the medium-term lending facility this week, the Shanghai Securities Journal reported citing analysts. Also, policymakers are observing stimulus effects after making the largest ever 15 bps cut to the five-year LPR last month, the newspaper cited analysts as saying. The room for MLF rate cut will be limited in the future amid the rapid tightening of monetary policy by the Federal Reserve, and the PBOC may resort to lowering LPR to stimulate loan demand in the next stage, the newspaper said citing analysts.
China will seize the current window to increase pro-growth policy intensity without resorting to excessive money supply, focusing on ensuring employment and stable prices, according to a statement on the gov website following the State Council executive meeting late on Wednesday. China will step up efforts to support private investment, which accounts for more than half of the total investment, and measures will include selecting a batch of major construction projects to attract private capital, the statement said.
China’s balance of payments is resilient to any capital flow shocks as the outflows under securities investment was offset by the surplus in foreign trade in goods and direct investment, the 21st Century Business Herald reported citing Guan Tao, a former forex official. There was a net outflow of USD21.6 billion under securities investment in May, the slowest pace since February, the newspaper said citing data by State Administration of Foreign Exchange. Foreign goods trading registered a surplus of USD38.3 billion in May, an increase of 97% y/y, while the surplus in direct investment maintained basically the same level as last May at USD5.5 billion, the newspaper said.
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