MNI China Daily Summary: Tuesday, August 27

     DATA: Profits of companies tracked by the National Bureau of Statistics

(NBS) rose 2.6% y/y after falling 3.1% in June. Accumulated profits in the first

seven months improved to a 1.7% reduction y/y from the 2.4% decline in Jan-June.

Improved profits in four industries including petroleum processing, electrical

machinery, chemical and automobile manufacturing dragged up the headline profit

growth by 5.3 percentage points, according to the NBS.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY80 billion via

7-day reverse repos. This resulted in a net injection of CNY30 billion given the

maturity of CNY50 billion in reverse repos, according to Wind Information. The

injection aims to offset the maturity of reverse repos and keep the liquidity in

the banking system reasonable and ample, the PBOC said.

     RATES: The 7-day weighted average interbank repo rate for depository

institutions (DR007) rose to 2.7056% from Monday's close of 2.6826%, Wind

Information showed. The overnight repo average increased to 2.6715% from 2.6414%

on Monday.

     YUAN: The yuan closed at 7.1670 against the U.S. dollar from 7.1528 on

Monday. The PBOC set the dollar-yuan central parity rate higher at 7.0810,

compared with 7.0570 on Monday.

     BONDS: The yield on the 10-year China Government Bond was last at 3.0500%,

down from Monday's close of 3.0525%, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index rallied 1.35% to 2,902.19.

Hong Kong's Hang Seng Index tumbled 0.06% to 25,664.07.

     FROM THE PRESS: PBOC Governor Yi Gang has urged banks to refer to the new

LPR pricing for new lending in a bid to lower real lending rates, according to a

statement on the PBOC website. Yi said banks should break through the implicit

lower limit of loan interest rates, and optimise credit structures to provide

financial support to small private companies, and to firms in the manufacturing

and service sectors. Yi met with 24 major banks on the LPR issue on Monday.

     The PBOC is unlikely to lower the interest rate on the medium-term lending

facility (MLF) to drive down the loan prime rate (LPR) immediately and may delay

until mid-September, China Securities Journal reported. Citing analysts, the

Journal's report said a lower MLF rate would drag market interest rates lower

and would not contribute towards keeping the yuan exchange rate stable in the

short term. Food inflation also restricts the downward adjustment of policy

interest rates, the newspaper added.

     China's yuan exchange rate is likely to keep fluctuating in the short term

but there were no significant factors driving depreciation in the medium and

longer terms, according to a report in the China Securities Journal. Citing

analysts, the Journal report said that the exchange rate could be impacted by

external risks and market sentiment in the short term. China's imports and

exports were relatively stable in the first seven months of 2019 and exports had

been stronger than expected, and these factors meant there were no major risks

in a further long term depreciation of the currency, according to Ming Ming,

chief analyst at CITIC Securities.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]