MNI China Daily Summary: Tuesday, June 7

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1%. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion 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) fell to 1.6225% from the close of 1.6479% on Monday, Wind Information showed. The overnight repo average decreased to 1.4153% from the previous 1.4408%.

YUAN: The currency weakened to 6.6655 against the dollar from Monday's close of 6.6457. The PBOC set the dollar-yuan central parity rate higher at 6.6649, compared with 6.6691 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8075%, down from Monday's close of 2.8180%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.17% to 3,241.76, while the CSI300 index rose 0.31% to 4,179.13. The Hong Kong's Hang Seng Index fell 0.56% to 21,531.67.

FROM THE PRESS: The yuan will remain basically stable, supported by the adjustment of the U.S. dollar index, easing of pandemic curbs and growing confidence in China’s economic growth, the China Securities Journal reported citing analysts. The Fed's continued tightening of monetary policy has been priced in the market, and U.S. growth is likely to slow gradually, which may weigh on the dollar index, the newspaper said citing analysts from Shanxi Securities. The large trade surplus, net inflow of direct investment, and increase in private forex asset holdings will help keep the yuan at a balanced level, the newspaper said citing Guan Tao, a former forex official. On Monday, the onshore yuan rose above 6.64 against the dollar to hit a nearly month high, the newspaper said.

China should accelerate fiscal spending on infrastructure projects, and relax restrictive policies on real estate for homebuyers and developers to help release potential credit demand, wrote Lian Ping, dean of Zhixin Investment Research Institute in an article published by Yicai.com. The launch of infrastructure projects requires matching funds, mainly medium and long-term borrowing by enterprises, said Lian. Local authorities should lift home purchase limits and increase mortgage quotas to boost home sales, as the real estate downturn has greatly restrained consumption and investment and led to shrinking financing needs of various sectors, said Lian.

China’s economic growth is expected to return to above 5% in the second half of the year, with pro-growth policies kicking in to fill the gap from March to mid-May, the China Securities Journal reported citing analysts from HUAXI Securities. Recent high-frequency data, such as a narrowing decline in crude steel output, rebounding power generation and the vehicle logistics index, show that the resumption of production is accelerating in May, the newspaper said. Growth will recover significantly in Q3, mainly driven by accelerated infrastructure investment, the newspaper said citing analysts.