MNI China Daily Summary: Thursday, June 20

TOP NEWS: China's Loan Prime Rate remained unchanged on Thursday, according to a People's Bank of China (PBOC) statement, in line with market expectation as the central bank aims to hold the key policy rate stable due to weak yuan concerns and bank profits. The one-year LPR, based on the PBOC’s Medium-term Lending Facility rate and quotes submitted by 20 banks, was left at 3.45% and the five-year plus maturity was held at 3.95%.

EXCLUSIVE: China's Loan Prime Rate will likely fall in coming months as lenders’ funding costs decline due to lower deposit interest rates and as regulators crack down on extra interest payments to depositors, while the central bank looks to downgrade the role of its medium-term lending facility.

LIQUIDITY: The PBOC conducted CNY20 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to a net injection of CNY18 after offsetting the CNY2 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.9021% from 1.8762% on Wednesday, Wind Information showed. The overnight repo average increased to 1.8947% from the previous 1.8621%.

YUAN: The currency weakened to 7.2605 against the dollar, from 7.2570 at Wednesday's close. The PBOC set the dollar-yuan central parity rate higher at 7.1192, compared with 7.1159 set on Wednesday. The fixing was estimated at 7.2572 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.2450%, down from Wednesday's close of 2.2485%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.42% to 3,005.44, while the CSI300 index edged down 0.72% to 3,503.28. The Hang Seng Index was down 0.52% to 18,335.32.

FROM THE PRESS: The China Securities Regulatory Commission has released eight reform measures on the science and technology innovation board to improve the inclusiveness of new industries, Securities Daily reported. The CSRC will support those high-quality but not-yet-profitable companies to list and establish a green channel for equity and debt financing, mergers, and acquisitions of key technology enterprises. The regulator will also strictly crack down on fraudulent issuances and financial fraud and guide the founding team or core R&D personnel to extend the share lock-up period voluntarily, the newspaper said.

Authorities need to expand domestic demand to deal with overcapacity rather than engaging in “de-capacity” which may lead to shortages in the long term, according to Chen Yuyu, a director at the Peking University Institute of Economic Policy. Beijing should negotiate with the EU and U.S. to find a solution that respects all parties' security and stability, and avoids trade frictions. The government should ensure Chinese companies have an international environment to allow them to “go global”. (Source: 21st Century Business Herald)

Authorities will support new SMEs with central fiscal funds and promote fresh industrialisation, the Ministry of Finance has announced. According to a notice on the ministry’s website, local governments are encouraged to enhance SME innovation through the guidance of central funds, and give play to the leading role of specialised "little giant" enterprises. Central fiscal funds will support SMEs in key areas to tackle new technologies and develop new products, the notice added. (Source: Securities Daily)