MNI China Daily Summary: Thursday, October 12

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY162 billion via 7-day reverse repo, with the rate unchanged at 1.80%. The operation has led to a net drain of CNY346 billion after offsetting the maturity of CNY508 billion reverse repos today, according to Wind Information.

POLICY: A leading Chinese official has raised the possibility of using central bank digital currencies as an interest-bearing store of value, and not just for settlement, which has been the role so far envisaged for the digital yuan by the People’s Bank of China. Until now the PBOC has classed E-cny as part of M0, a narrow definition of money including cash, but Lu Lei, deputy head of the State Administration of Foreign Exchange told the China(Beijing) Digital Finance Forum that using digital currencies as M2, a broader definition, could improve the authorities’ control of macroeconomic variables.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9525% from 1.9247%, Wind Information showed. The overnight repo average fell to 1.7972% from the previous 1.8598%.

YUAN: The currency strengthened to 7.2941 against the dollar from 7.2980 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 7.1776, compared with 7.1779 set on Wednesday. The fixing was estimated at 7.2946 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.7375%, down from Wednesday's close of 2.7450%, according to Wind Information.

STOCKS: The Shanghai Composite Index closed up 0.94% at 3,107.90, while the CSI300 index increased 0.95% to 3,702.38. The Hang Seng Index rallied 1.93% to 18,238.21.

FROM THE PRESS: China’s sovereign fund, Central Huijin Investment, has doubled down on its investments in the country’s “Big Four” state-owned banks for the first time since 2015. Bank of China, Agricultural Bank of China, China Construction Bank, and Industrial and Commercial Bank of China confirmed the news. Based on the closing prices of the banks Tuesday, the fund spent about CNY475 million to increase its holdings, while additional share purchases are expected in the next six months. (Source: Xinhua Finance)

China’s Q3 GDP growth may reach over 4% as the economy shows more signs of recovery. Retail sales are expected to rebound to about 5.5% in September, supported by the lower comparison base for the same period last year alongside a boost to domestic tourism driven by the Hangzhou Asian Games and the recent Golden Week holiday, said Wen Bin, chief economist at China Minsheng Bank. Industrial output may rebound to 4.7% as the marginal improvement in domestic and external demand, and rising willingness of enterprises to restock inventories drove the recovery of manufacturing production, said Wen. (Source: Securities Daily)

The China Securities Regulatory Commission will introduce a series of policies to strengthen further financing support for scientific and technological innovation enterprises in different sectors, said CSRC Vice Chairman Chen Huaping. The Shanghai Stock Exchange will improve the precise cultivation of core tech companies and promote capital market reforms to support self-reliance in high-level technology, said Dong Guoqun, deputy general manager at SSE. (Source: China Securities Journal)