MNI China Daily Summary: Tuesday, August 13

MNI (BEIJING) - DATA: China's M1 money supply contracted for a fourth consecutive month in July, falling by 6.6% y/y to a record low, People's Bank of China (PBOC) data showed. Growth in the M2 measure quickened to 6.3%, rising from June’s 6.2% growth and beating the 6.0% forecast. Banks extended CNY260 billion in new loans in July, declining from June’s CNY2.13 trillion. Total social financing rose by CNY770 billion, falling from growth of CNY3.3 trillion in June. 

LIQUIDITY: The PBOC conducted CNY385.7 billion via 7-day reverse repos, with the rate unchanged at 1.70%. The operation led to a net injection of CNY385.08 billion after offsetting CNY0.62 billion in maturities, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.8798% from 1.9114%, Wind Information showed. The overnight repo average fell to 1.9301% from 1.9556%.

YUAN: The currency strengthened to 7.1694 from 7.1808 at Monday's close. The PBOC set the dollar-yuan central parity rate higher at 7.1479, compared with 7.1458 on Monday. The fixing was estimated at 7.1801 by a Bloomberg survey.

BONDS: The yield on 10-year China Government Bonds was last at 2.2250%, up from Monday's close of 2.1808%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index gained 0.34% to 2,867.95 while the CSI300 index edged up 0.26% to 3,334.39. The Hang Seng Index rose 0.36% to 17,174.06.

FROM THE PRESS: The banking sector could further cut deposit rates causing depositors to seek higher returns from financial management products, Securities Daily reported, citing Wang Qing, analyst at Golden Credit Rating. Smaller banks have followed state-owned banks in cutting deposit rates by up to 80 basis points since August, bringing medium- and long-term deposits to just over 2%, the newspaper said. The move would support banks to stabilise net interest margins and allow for loan interest rates reductions, the newspaper said, citing analysts.

Local government use of treasury and special treasury bonds has suffered from irregular management, delayed construction and idle funds, recent audits revealed. In Shandong province, auditors found CNY767 million of the assigned CNY31.3 billion was idle and 10 of the planned 304 projects had failed to start. Luo Zhiheng, chief economist of Yuekai Securities said authorities should ensure solid project preparation to avoid delays later and enhance supervision. (Source: Yicai)

Analysts expect pork prices to rise further as demand for pork increases during the peak Q3 consumption period, according to Yicai news outlet. Prices will remain high until late November given continued supply pressure, agricultural analysts said. China Pig Farming Network data showed domestic live pig prices reached 21.26 yuan/kg on Aug 12, up 23.5% year-on-year and 14.06% month-on-month, Yicai noted. However, Q2 price increases were driven by supply factors without any significant change in demand, an analyst said.