MNI China Daily Summary: Tuesday, April 12

LIQUIDITY: The People's Bank of China (PBOC) injected CNY20 billion via 7-day reverse repos with the rates unchanged at 2.10%. The operation has led to a net injection of CNY20 billion as no reverse repos maturing 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 1.9728% from the close of 1.9075% on Monday, Wind Information showed. The overnight repo average fell to 1.7511% from the previous 1.8395%.

YUAN: The currency weakened to 6.3711 against the U.S. dollar from Monday's close of 6.3699. The PBOC set the dollar-yuan central parity rate higher at 6.3795, compared with 6.3645 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8075%, up from Monday's close of 2.8025%, according to Wind Information.

STOCKS: The Shanghai Composite Index rallied 1.46% to 3,213.33, while the CSI300 index gained 1.95% to 4,179.97. The Hong Kong's Hang Seng Index edged up 0.52% to 21,319.13.

FROM THE PRESS: China is more likely to cut reserve requirement ratios and interest rates in Q2 after the latest release of its loan data, the Shanghai Securities News said citing analysts. Data released yesterday indicated a lack of demand by businesses, residents and consumption, which makes pro-active policies more necessary, the newspaper said. However, the central bank’s policy space may be limited given the inversion of China-U.S. interest rate spread, so structural tools have become more important, the newspaper said.

The yuan is more likely to see a mild weakening against the U.S. dollar instead of a sharp depreciation in the short and medium term, as China's relatively high trade surplus will offset the capital outflows in portfolio investments, the China Securities Journal reported citing analysts. Though the China-U.S. 10-year treasury bond spread turned negative for the first time since mid-2010 on Monday, the real interest rate spread is still considerable after taking inflation into account, the newspaper said citing analysts. The central parity rate of the yuan may fluctuate between 6.3 and 6.8 against the U.S. dollar this year, the Journal said citing Gao Ruidong, chief economist at Everbright Securities.

Chinese authorities are stepping up efforts to keep logistics moving as restrictions imposed to control the pandemic threaten to disrupt everything from the transportation of medical goods to energy and raw materials, the 21st Century Business Herald reported citing both a notice from the State Council on Monday and other levels of the government. Local authorities should not ban roads and shipping lanes or set up quarantine testing stops along the highway, the State Council said. China’s logistics industry faces grave challenges due to the rising Covid cases, the newspaper said citing the China Federation of Logistics and Purchasing.