MNI China Daily Summary: Tuesday, Dec 21

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos and CNY10 billion via 14-day reverse repo with the rate unchanged at 2.2% and 2.35% respectively on Tuesday. This operation has injected net CNY10 billion after offsetting the maturity of CNY10 billion repos today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.0449% from the close of 2.1025% on Monday, Wind Information showed. The overnight repo average fell to 1.8361% from the previous 1.9756%.

YUAN: The currency strengthened to 6.3707 against the dollar from 6.3781 on Monday. The PBOC set the dollar-yuan central parity rate lower at 6.3729, compared with 6.3933 set on Monday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8875%, down from 2.8880% of Monday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index up 0.88% to 3,625.13, while the CSI300 rose 0.68% to 4,913.49. The Hong Kong's Hang Seng Index gained 1.00% to 22,971.33.

FROM THE PRESS: China can potentially cut the Loan Prime Rate further in first half after 5-bps reduction of the 1-Year benchmark on Monday, as it continues with policies promoting stable growth through looser credit, the China Securities Journal said citing analysts including Wang Qing of Golden Credit Rating. The PBOC may first lower the rates of the medium-term tool MLF by 10 basis points, daily market operations in Q1, the journal said citing analysts. That the 5-year LPR was kept unchanged yesterday indicated continued prudent policy stance toward the real estate sector, the newspaper said.

China’s regulators have met with large developers to encourage those in good standing to buy the assets of competitors in financial trouble, as a way to diffuse the risks in the real estate sector hard hit by regulatory tightening, the PBOC-run Financial News reported. The central bank and the banking regulator CBIRC are also asking banks to push for the acquisitions of loans, and not to cut off funding to large developers facing risks and cash crunch, said the newspaper. China recently introduced a series of measures to ease tensions and restore normal real estate sales and financing, said the newspaper. Developers sold CNY47.3 billion bonds in November, up 55.6% from October, while individual mortgages rose for two months, it said.
There is “little doubt” that China’s economy can grow above 5% in 2022 and gradually return to normal, in line with political targets, Lian Ping, the former chief economist of Bank of Communications and a sometime advisor to the government, wrote on Yicai.com. Housing investments may continue to weigh on the economy, slowing to 4.2% y/y growth as the government maintains its tightening efforts, while spending may gradually recover to the pre-pandemic level given China’s successful anti-pandemic measures and policies stimulating public spending, Lian said. Chinese exports may regain double-digit growth in H2 of 2022 as global logistics improve, said Lian. CPI may average 2.4% next year while slowing commodity prices may push PPI to negative by H2, said Lian.