MNI China Daily Summary: Tuesday, October 11

LIQUIDITY: The People's Bank of China (PBOC) injected CNY2 billion via 7-day reverse repos with rates unchanged at 2.00%. The operation led to a net drain of CNY60 billion after offsetting the maturity of CNY62 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) increased to 1.5034% from the close of 1.4066% on Monday, Wind Information showed. The overnight repo average rose to 1.1747% from the previous 1.1050%.

YUAN: The currency weakened to 7.1788 against the U.S. dollar from the previous close of 7.1440. The PBOC set the dollar-yuan central parity rate higher at 7.1075, compared with 7.0992 set on Monday.

BONDS: The yield on the 10-year China Government Bond was last at 2.7725%, up from Monday's close of 2.7700%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.19% to 2,979.79, while the CSI300 index gained 0.18% to 3,727.69. Hong Kong's Hang Seng Index tumbled 2.23% to 16,832.36.

FROM THE PRESS: The yuan is likely to hover between 7 and 7.3 against the U.S. dollar over the rest of 2022 as expectations for higher U.S interest rates pressure the currency, the CPPCC Daily reported citing Sheng Songcheng, previously head of the statistics and analysis department at the PBOC. The yuan is unlikely to keep depreciating significantly over the longer run. The PBOC can re-implement its counter-cyclical factor or increase the scale of central bank bill issuance in the offshore market to stabilize yuan, Sheng was cited as saying. It is crucial to improve the outlook for China's economy, which can greatly reduce the impact of U.S. monetary tightening, said Sheng.

China’s dynamic “zero-Covid” policy is sustainable and must persist as the epidemic is still spreading nationwide, with 31 provinces reporting 434 infections on Oct 9, according to a commentary by the Party-run People’s Daily. The policy does not target precisely zero infections but seeks to eliminate outbreaks immediately to prevent any spread, the newspaper said. China cannot relax its prevention measures but it must also be vigilant against excessive epidemic control and continuously improve precise measures of infection control. China’s epidemic controls are the most economical and effective, and are the best choice currently, the Daily said.

China’s consumer price index in September will rise close to the government's targeted 3% y/y ceiling compared to August’s 2.5% print as a low comparison base last year, coupled with significant gains in pork and vegetable prices due to holiday demand, offset declining fuel costs, the Securities Daily reported citing Golden Credit Rating chief analyst Wang Qing. The risk of high inflation is low as weak demand does not support an overall rise in prices, Wang added. The producer price index, which measures factory-gate inflation, will slow to a y/y rate of around 1.4% compared to 2.3% in August as global oil prices declined and domestic industrial product prices for steel and cement fell due to weakness in the property sector, the newspaper said citing Wang.