MNI China Daily Summary: Tuesday, February 7

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY393 billion of operations via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net drain of CNY78 billion after offsetting the maturity of CNY471 billion in reverse repos.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) edged up to 2.1394% from 2.0039% on Monday, Wind Information showed. The overnight repo average rose to 2.2791% from the previous 1.8124%.

YUAN: The currency closed at 6.7876 against the dollar at 16:30pm Beijing time from 6.7832 on Monday. The PBOC set the dollar-yuan central parity rate higher at 6.7967, compared with 6.7737 set on Monday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8950%, down from Monday's close of 2.9090%.

STOCKS: The Shanghai Composite Index rose 0.29% to 3248.09, while the CSI300 index was up 0.18% to 4094.23. The Hang Seng Index was up 0.36% to 21298.70.

FROM THE PRESS: The People’s Bank of China drained liquidity from the interbank market after Chinese New Year to mop up a big injection it made before the holiday, but analysts predict the central bank will remain flexible in its open market operations and keep liquidity ample amid the economic recovery in a bid to reduce funding costs, China Securities Journal reported Tuesday. The PBOC drained a net CNY1.44 trillion in the past 8 trading days to prevent the excess liquidity flooding the market as the bank injected a net CNY2.05 trillion in the week before the new year, marking the largest weekly injection in history, the report pointed out.

China's banks are accelerating the approval of consumer loans to offset interest margin pressure as the volume of mortgage loans has shrunk and as authorities encourage lenders to support consumption, China Business News reported. The volatility of equity, bond and property markets in 2022 pushed up households' bank deposits, which led to a narrowing in interest margins, the report said. Competition among commercial banks for consumer loans has pushed interest rates down to 3%-4%. With the boom in consumer loans, the risk that the funds from these consumer loan flows into property market, which has been forbidden, needs to be watched, the report warned.

The State-owned Assets Supervision and Administration Commission said in a meeting on Monday that it will strengthen investment in key security fields such as national defense and military industry, as well as food and energy resources, to serve the country's major strategies, according to Securities Times. The regulator of state-owned companies stressed it will focus on investment in new infrastructure, urbanisation, transportation and water conservancy. It will work to improve self-sufficiency in key materials, core components, and basic software, it said. Strategic emerging industries and modern industrial chains will be boosted to provide China with competitive advantages.