MNI China Daily Summary: Tuesday, July 9

EXCLUSIVE: Chinese steel rebar prices are likely to stage only a partial recovery in the second half after sliding to CNY3,275 per tonne from CNY3,996 in January as construction and infrastructure work declines, with a risk of further falls if output controls lead to gluts of iron ore and coal, local analysts told MNI.

LIQUIDITY: The PBOC conducted CNY2 billion via 7-day reverse repo on Tuesday, with the rates unchanged at 1.80%. The operation has led to no change to the liquidity after offsetting the CNY2 billion maturity today, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.8039% from 1.8204%, Wind Information showed. The overnight repo average decreased to 1.6776% from the previous 1.7545%.

YUAN: The currency weakened to 7.2720 from 7.2698 against the dollar from Monday. The PBOC set the dollar-yuan central parity rate higher at 7.1310, compared with 7.1286 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.2275% down from 2.2525% at Monday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 1.26% to 2,959.37 while the CSI300 index rose 1.12% to 3,439.81. The Hang Seng Index closed flat at 17,523.23.

FROM THE PRESS: The People’s Bank of China's decision to use temporary repurchase and reverse repurchase tools marks the operational start of a new interest rate corridor, according to Wang Qing, chief macro analyst at Golden Credit Rating. However, capital and money markets face limited disturbance given they have followed the new corridor for some time, Wang added. Zhang Xu, chief fixed income analyst at Everbright Securities, said the central bank still aims for reasonable liquidity to finance the real economy, and will not allow investors to speculate on interest rate products. (Source: Securities Daily)

China’s new yuan loans will likely reach CNY2.3 to 2.5 trillion in June, a year-on-year decrease of CNY500 to 700 billion, more than May’s CNY950 billion, amid sluggish credit demand and policymakers discouraging banks’ pursuit of large scale credit expansion, said Wang Yifeng, analyst at Everbright Securities. Aggregate finance would reach CNY3.3 to 3.5 trillion, compared to CNY2.07 trillion in the previous month, Wang predicted. M2 money supply could reach 6.8%, slowing from May’s 7% reading, said Zhou Guannan, analyst from Huachuang Securities. This week is the PBOC’s window for releasing June financial data. (Source: Securities Daily)

Analysts expect China’s June CPI to reach 0.4% y/y up from 0.3% in May, amid rising pork prices, Securities Daily has reported citing Zhongtai Securities analysts. Pork prices have increased 27.2% y/y, while fuel costs are up more than 10%. PPI is expected to decline 0.6% y/y due to base effects, narrowing from May’s 1.4% decline, analysts noted. China’s June inflation data is due on Wednesday.