MNI China Daily Summary: Thursday, October 10
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY150 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY142 billion after offsetting maturities of CNY292 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6542% on Thursday from 1.8222% previously, Wind Information showed. The overnight repo average decreased to 1.5225% from the previous 1.6463%.
YUAN: The currency weakened to 7.0787 against the dollar, from 7.0673 at Wednesday's close. The PBOC set the dollar-yuan central parity rate higher at 7.0742, compared with 7.0568 set on Wednesday. The fixing was estimated at 7.0756 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 2.1300%, down from Wednesday's close of 2.1768%, according to Wind Information.
STOCKS: The Shanghai Composite Index gained 1.32% to 3,301.93, while the CSI300 index was up 1.06% to 3,997.79. The Hang Seng Index rose 2.98% to 21,251.98.
FROM THE PRESS: Market investors should manage their expectations for additional fiscal stimulus, as the current priority is to make good use of existing proactive fiscal policies, while any additional issuance of treasury bonds or special treasuries will need to wait until late October to be passed by the Standing Committee of the National People's Congress, Yicai.com reported citing analysts. The possibility of issuing another CNY1 trillion special treasuries would increase should downward pressure rise in Q4, the newspaper said citing analysts.
Banks will likely further lower deposit rates to ease pressure on their shrinking net interest margin following the recent cut to existing housing mortgage rates, China Securities Journal reported citing analysts. The next round of deposit rate cuts may see a 0.2-0.25 percentage point reduction, analysts from Bank of China estimated. A 50 basis point cut to existing housing mortgages will lead to a 7bp reduction in the bank’s net interest margin as well as a 3% and 6% drop in operating income and net profit, said Dong Ximiao, chief researcher at Merchants Union Consumer Finance. The average net interest margin was 1.54% in Q2, still at a historical low, the newspaper added.
The total size of stock ETFs has exceeded CNY3 trillion to set a new high, as various funds seek to enter the stock market through the funds amid improved investor confidence, 21st Century Business Herald reported. The net asset value of stock ETFs rose by about CNY1 trillion in the past six trading days as of Oct 8 when the Shanghai Composite Index and Shenzhen Component Index surged by 18.55% and 30.61%, the newspaper said. The substantial expansion was mainly attributed to increasing holdings by "national team" funds such as Central Huijin and individual investors’ shifting to portfolio investment.