LIQUIDITY: The People's Bank of China (PBOC) injected CNY2 billion via 7-day reverse repos with the rate unchanged at 2.0%. This keeps the liquidity unchanged after offsetting the maturity of CNY2 billion repos today, according to Wind Information. The operation aims to keep 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 1.6584% from the close of 1.6159% on Monday, Wind Information showed. The overnight repo average fell to 1.1170% from the previous 1.2220%.
YUAN: The currency strengthened to 6.8980 against the dollar from Monday's close of 6.9210. The PBOC set the dollar-yuan central parity rate higher at 6.8802, compared with 6.8698 set on Monday.
BONDS: The yield on 10-year China Government Bonds was last at 2.6310%, down from Monday's close of 2.6325%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.42% to 3,227.22, while the CSI300 index fell 0.34% to 4,075.79. Hong Kong's Hang Seng Index lost 0.37% to 19,949.03.
FROM THE PRESS: The yuan is expected to continue to depreciate against the U.S. dollar in H2 2022, though it is likely to be a moderate, orderly and controllable process, wrote China Finance 40 Forum, a prominent think tank, citing market analysts. The People’s Bank of China will probably refrain from intervening in the currency unless a disorderly or panic-driven devaluation trend takes hold. The analysts also noted that the central bank's recent rate cuts highlighted its priority of maintaining monetary policy independence as it looks to boost economic growth, which indicates the yuan will remain more flexible. Currently, the yuan has shown relative resilience against the dollar when compared to other currencies, owing to China's robust trade exports, analysts noted.
China will focus on stabilizing employment and prices, while keeping the economy operating within a reasonable range, CCTV News reported, citing Premier Li Keqiang, speaking at a national teleconference on Monday. Beijing has decisively launched a package of policies with greater intensity than what was seen in 2020, in order to stabilize economic growth, and it is necessary to put all of the pro-growth policies in place alongside deepening administrational reform to stimulate market vitality and nurture market players, Li said.
Liquidity conditions in the interbank market are expected to remain ample in September, against the backdrop of limited incremental pro-growth policies and a subdued economic recovery, the Shanghai Securities News wrote, citing analysts. Even though both the DR001 and DR007 rates have risen over the last week due to increased funding needs into month-end, market liquidity will soon be supplemented after the release of fiscal expenditure at the end of August, the newspaper noted, citing analysts.