MNI China Daily Summary: Thursday, June 27

     POLICY: China is more likely to cut the benchmark lending rate in the

second half as economic headwinds pick up while the U.S. Federal Reserve pursues

easing, the Bank of China's research team said Wednesday in its quarterly

outlook. The current level of benchmark lending rate makes it more difficult to

lower the costs of lending, making policy action possible for the central bank,

particularly as the U.S. economy and the dollar begin to lose steam, Zong Liang,

chief researcher at the BOC's Institute of International Finance told MNI.

     DATA: Industrial profits made by the companies tracked by the National

Bureau of Statistics rose 1.1% y/y after dropping 3.7% in April. Accumulated

profits for the first five months fell 2.3% y/y, but improved from the 3.4%

decline in Jan-April.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

(OMOs) for a fourth day this week, leaving liquidity unchanged as no reverse

repos matured, according to Wind Information. Total liquidity in the banking

system is at a reasonable and ample level, the PBOC said in a statement on its

website. 

     RATES: The 7-day weighted average interbank repo rate for depository

institutions (DR007) rose to 2.5590% from Wednesday's close of 2.3801%, Wind

Information showed. The overnight repo average decreased to 0.9503% from

Wednesday's 0.9645%.

     YUAN: The yuan strengthened to 6.8768 from Wednesday's close of 6.8855. The

PBOC set the dollar-yuan central parity rate at 6.8778 from Wednesday's 6.8701.

     BONDS: The yield on the 10-year China Government Bond was last at 3.2700%,

unchanged from Wednesday's close, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index rose 0.69% to 2,996.79. Hong

Kong's Hang Seng Index rose 1.42% to 28,621.42. 

     FROM THE PRESS: China has achieved significant progress in its economic

rebalancing considering the complicated domestic and external environment, with

the restructuring making through a difficult first half, the Securities Times

reported. The economy still faces severe challenges and the opening up efforts

need to be continued, the newspaper said.

     China will stick with prudent monetary policy, maintain moderate tightness,

adjust and fine-tune in line with changes in the international and domestic

situations, Premier Li said in a statement following the weekly State Council

meeting on Wednesday. Liquidity will remain reasonably ample and actual lending

rates for small businesses will be further lowered, Li said. Further support

measures, such as reducing fees and providing subsidies, will also be carried

out this year, according to the statement.

     China's agricultural supply was sufficient in the first half of 2019, but

pork prices remain elevated due to the combination of African swine fever and

cyclical factors, which have increased inflationary pressures, the People's

Daily reported citing Tang Ke, Director of the Department of Market and

Information Technology of the Ministry of Agriculture and Rural Affairs. The

ministry will stabilize the production capacity of pigs and increase supply, the

newspaper reported.

--MNI Beijing Bureau; tel: +86 (10) 8532-5998; email: flora.guo@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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