MNI China Daily Summary: Tuesday, June 14

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1% on Tuesday. 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 1.5942% from the close of 1.5970% on Monday, Wind Information showed. The overnight repo average sit at 1.4059%, flat from the previous close.

YUAN: The currency weakened to 6.7358 against the dollar from Monday's close of 6.7341. The PBOC set the dollar-yuan central parity rate higher at 6.7482, compared with 6.7182 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8100%, up from Monday's close of 2.8050%, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 1.02% to 3,288.91, while the CSI300 index rose 0.79% to 4,222.31. The Hong Kong's Hang Seng Index was barely changed at 21,067.99.

FROM THE PRESS: The PBOC still have sufficient room for monetary easing including cuts to the reserve requirement ratio and interest rates, as domestic inflation pressure is controllable and the spillover effect of the Fed rate hike cycle has passed its peak, the China Securities Journal reported in the front-page citing analysts. The medium-term lending facility rate may be lowered slightly once in H2, the newspaper said citing Huang Wentao, chief economist of CSC Financial. Mid-year or year-end could be a suitable timing for RRR cuts to meet the liquidity gap of large-scale issuance of government bonds and the maturity of MLF, the newspaper said citing Ming Ming, chief economist of CITIC Securities.

The PBOC is more likely to lower the five-year Loan Prime Rate while keeping the one-year LPR stable, to help stimulating residential mortgage demand and boosting the housing market, the 21st Century Business Herald reported citing Ming Ming, chief economist of CITIC Securities. There is room for 15 bps cut in the five-year LPR, as the growth of new residential medium and long-term loans in May were still over CNY300 billion short of that in last May, repairing at a relatively slow pace, the newspaper said citing Li Chao, chief economist of Zheshang Securities. Any rate cut may come in June or July when core first- and second-tier cities such as Beijing, Shanghai, Shenzhen and Hangzhou are likely to loosen real estate regulations, the newspaper said citing Xiong Yuan, chief economist of Guosheng Securities.

Local governments should curb the increase in implicit debt and reasonably control the debt scale, according to a statement released by Office of the State Council on the gov website on Monday. Local governments should resolve debt risks by increasing revenue and cutting expenditure, and cashing in assets, so to effectively reducing the debt repayment burden of cities and counties, the statement said. Any illegal borrowing should be punished, the statement added.