MNI China Daily Summary: Tuesday, March 12

EXCLUSIVE: China will likely increase stock market regulation, such as tighter IPO rules and strengthened law enforcement, to create a fairer trading environment and restore investor confidence, which could push A-shares up 50%, a policy advisor told MNI in an interview.

POLICY: China will further open up its financial markets and promote yuan internationalisation, the People’s Bank of China said in a statement on its social media account on Wednesday, in the latest of a string of recent Chinese official announcements pointing to greater financial openness.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY10 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The reverse repo operation has led to no change to the liquidity after offsetting CNY10 billion maturity today, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.8696% from 1.8693%, Wind Information showed. The overnight repo average decreased to 1.7227% from the previous 1.7305%.

YUAN: The currency strengthened to 7.1743 against from a close of 7.1840 on Monday. The PBOC set the dollar-yuan central parity rate lower at 7.0963, compared with 7.0969 set on Monday. The fixing was estimated at 7.1855 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.4350% up from 2.3900% at Monday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.41% to 3,055.94 while the CSI300 index rose 0.23% to 3,597.49. The Hang Seng Index was up 3.05% to 17,093.50.

FROM THE PRESS: The National Administration of Financial Regulation is studying a reduction to the down-payment ratio of passenger car loans and the optimisation of the pricing mechanism on electric vehicles insurance to help boost car consumption, said NAFR Director Li Yunze. The administration will also actively support EV exports and building of warehouses overseas, provide more targeted financial services and expand the coverage of export credit insurance, said Li. (Source: China National Radio)

The People’s Bank of China is investigating rural commercial banks’ bond investments, due to concerns that speculative transactions will squeeze out funding support for the real economy, 21st Century Business Herald reported. The yields of 10- and 30-year treasury bonds rebounded from the historical lows set last week to reach 2.313% and 2.484% on Monday. Some rural commercial banks may have begun to cut their super-long-term bond holdings after the PBOC’s investigation, an unnamed bond trader said.

Chinese pork prices will likely remain under pressure in Q2 due to strong supply and weak demand despite February’s CPI data showing an end to a nine-month consecutive fall, largely driven by holiday effects, according to industry analysts. Major producers are expecting to accumulate losses and drive a reduction in capacity amid tight cash flows and rising debt-to-asset ratios. (Source: Yicai)