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LIQUIDITY: The People's Bank of China (PBOC) injected CNY80 billion via 7-day reverse repos with the rate unchanged. This resulted in a net injection of CNY70 billion due to the maturity of CNY10 billion reverse repos 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) decreased to 2.1732% from 2.1958% on Monday, Wind Information showed. The overnight repo average fell to 1.7311% from 1.9820%.
YUAN: The yuan weakened to 7.0072 against the dollar from 7.0010 on Monday. PBOC set the dollar-yuan central parity rate lower for the first time in four trading days at 6.9895, compared with Monday's 7.0029.
BONDS: The yield on 10-year China Government Bonds was last at 2.9200%, up from the close of 2.8800% on Monday, according to Wind Information.
STOCKS: The Shanghai Composite Index gained 0.71% to 3,227.96, while the CSI300 index rose 0.88% to 4,568.26. Hang Seng Index rallied 0.69% to 24,772.76.
FROM THE PRESS: The PBOC may lower banks' RRRs twice in H2 by a total of 50 bps and cut the MLF rate by 20 bps to meet the targets of CNY20 trillion in new loans and CNY30 trillion in social financing to consolidate the economic recovery, the 21st Century Business Herald reported. Citing Liu Ligang, Chief China Economist at Citibank, the report said that China's monetary policy should continue to be loose in H2 as the current recovery is still fragile with concerns about PPI deflation, high corporate financing costs and the wide spread in interest rates between China and other major economies.
The U.S. dollar is transitioning to a phase of weakness due to signs of stronger EU integration, increasing risks in U.S. assets and stagnation in global trade, the China Securities Journal reported citing investment bank CICC. This will likely boost demand for precious metals and yuan assets, the newspaper said. Foreign investors have steadily increased their positions in Chinese bonds by CNY322.4 billion in H1, 1.4 times that of the same period last year, the newspaper said.
Chinese President Xi Jinping is likely to use an upcoming speech to unveil more policies to support the Asia Infrastructure Investment Bank (AIIB) and help fund the regional and global economic recovery from the Covid-19 pandemic, the official English-language China Daily reported citing government analysts. Xi is also likely to use the speech to promote China's epidemic containment and growth opportunities, the Daily said.The AIIB has doubled its COVID-19 crisis recovery facility to provide up to $10 billion to member economies, and has approved coronavirus response loans to about a dozen Asian countries, including India, Pakistan, Vietnam, the Philippines, Mongolia and Indonesia, the Daily said.
Chinese authorities may tighten housing policies to keep prices at "healthier levels" in H2 if some cities continue to experience price surges, the Economic Information Daily reported. Citing Yan Yaojin, research director at CRIC, the Daily's report says that the average home price in 100 cities rose 10.9% year on year in H1, with some markets showing larger gains. Hangzhou, Nanjing and Chengdu, three second-tiered cities, led the gains with Chengdu's average jumping as much as 21% y/y, the newspaper said. Housing investments were favored due to lower returns on wealth products and stock volatility.
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