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Free AccessMNI China Daily Summary: Tuesday, May 10
LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rates unchanged at 2.10% on Tuesday. The operation has led to a net injection of CNY10 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) fell to 1.5366% from the close of 1.6499% on Monday, Wind Information showed. The overnight repo average increased to 1.3035% from the previous 1.3031%.
YUAN: The currency weakened to 6.7227 against the dollar from Monday's close of 6.7202. The PBOC set the dollar-yuan central parity rate higher at 6.7134, compared with 6.6899 set on Monday.
BONDS: The yield on 10-year China Government Bonds was last at 2.8075%, down from Monday's close of 2.8150%, according to Wind Information.
STOCKS: The Shanghai Composite Index gained 1.06% to 3,035.84, while the CSI300 index rose 1.09% to 3,919.87. The Hong Kong's Hang Seng Index tumbled 1.84% to 19,633.69.
FROM THE PRESS: China’s GDP may slow to about 2.1% in Q2 from Q1's 4.8%, as growth in some provinces may contract due to pandemic lockdowns, said Sheng Songcheng, a former director of the Statistics and Analysis Department of the People's Bank of China in a blog post. Sheng added that H1 GDP may come in around 3.5%. It is necessary to control the pandemic and resume work and production as soon as possible, said Sheng, who expects a rebound in the second-half of the year. Monetary policy should pay more attention to the use of quantitative tools to work with fiscal policy and buffer the spillover effects of the Fed's monetary tightening and imported inflation pressures, said Sheng.
The PBOC has established a market-based mechanism for deposit interest rates, allowing member banks to refer to the 10-year treasury bond yield and the benchmark 1-year Loan Prime Rate to adjust rates, Caixin reported citing the PBOC’s Q1 monetary policy report published on Monday. This is the first official disclosure of such a mechanism which would allow banks to stabilise debt costs and promote a further decline in actual lending rates, Caixin said. In the last week of April, the weighted average interest rate of new deposits in financial institutions nationwide was 2.37%, down 10 basis points from the previous week, Caixin said.
The yuan may still fluctuate widely in the short term, but it is unlikely to sharply depreciate as a rapid surge in the U.S. dollar index is approaching its end, the Securities Daily reported citing analysts. The sharp appreciation of the U.S. dollar in the short term is the main driving factor recent yuan weakness. The 10-year U.S. bond yield has risen above 3%, basically reflecting the expectation for Fed rate hikes and balance sheet reductions within the year, the newspaper said citing Wang Qing, chief analyst at Golden Credit Rating. On Monday, the onshore yuan once dipped to an intraday low of 6.7235, the lowest since Nov. 5 2020, while the dollar index has stood above 100 since mid-April, the newspaper said.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.