MNI China Daily Summary: Thursday, September 07

EXCLUSIVE: The Chinese economy will need further accommodative policy to maintain a potential growth rate between 5.5-6% over the next 10 years, while recent house-buying relaxations will help the country recover, with GDP tipped to reach around 5.3% this year, a policy advisor told MNI in an interview.

POLICY: China's exports decreased by 8.8% y/y in Aug, marking the fourth monthly fall after July's 14.5% y/y drop, and close to the consensus of a 9.0% y/y fall. The drop was mainly due to the shrinking external demand, data from Customs showed.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY330 billion via 7-day reverse repos, with the rates unchanged at 1.80%. The operation has led to a net injection of CNY121 billion after offsetting the maturity of CNY209 billion reverse repo today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9508% from 1.8251%, Wind Information showed. The overnight repo average increased to 1.8338% from 1.5082%.

YUAN: The currency weakened to 7.3279 to the dollar from 7.3084 on Wednesday. The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1986 on Thursday, compared with 7.1969 set on Wednesday. The fixing was estimated at 7.3124 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.7150%, up from Wednesday's close of 2.7050%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 1.13% to 3,122.35 while the CSI300 index decreased 1.41% to 3,758.47. The Hang Seng Index was down 1.34% to 18,202.07.

FROM THE PRESS: Housing markets in first-tier cities including Beijing and Shanghai have recorded active transactions with homebuyer confidence boosted following the recent easing of mortgage rules. On the first weekend after the new policy was introduced, the number of single-day visits and transactions increased by 2.5-3 times on the week, said a sales manager in Shanghai. Mega cities are expected to see in a wave of purchases seeking to upgrade, as the number of second-hand listings in Beijing and Shanghai has increased by over 4,000 and 3,000 units. However, the performance in the second- and third-tier cities remains flat so far. (Source: Xinhua News Agency)

Chinese demand for pork may increase in Q3 but prices are unlikely to rise significantly due to an abundance of supply, according to Yicai. Huatai Securities noted major pork producers had suffered significant losses in Q2 due to low prices, with the asset-liability ratio of listed companies remaining high and fixed-asset investment slowing. Given heavy losses and weak cashflow, major breeders may reduce sow production capacity across the country which could support prices in 2024. However the market has also seen a recent increase in secondary fattening, which shifts present supply into the future, putting downward pressure on 2024 price.

Buyers in China purchased 698,000 new energy vehicles in August, an increase of 32% y/y and 9% m/m, according to statistics from the China Association of Automobile Manufacturers. The association said the market has recorded 5.1 million unit sales year-to-date, up 39% y/y. Haitong Securities forecasted NEV sales growth could be sustained given decreasing raw material input costs and continued policy support. The investment firm recommended stock pickers focus on firms specialising in lithium manganese iron phosphate batteries (Source: Yicai)