MNI China Daily Summary: Tuesday, October 22

POLICY: Chinese firms are increasingly hedging their forex risk via derivatives, with 27% of companies using the instruments since the start of the year, an historical high, according to Li Hongyan, deputy director general at the State Administration of Foreign Exchange.

POLICY: Foreign investors are increasingly buying yuan-denominated bonds, officials at the State Administration of Foreign Exchange told reporters, noting China’s onshore stock and bond markets will remain attractive thanks to new economic stimulus measures and further relaxations of the fixed-income market.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY158.4 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY90.1 billion after offsetting the maturity of CNY68.3 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.6362% from the previous 1.6277%, Wind Information showed. The overnight repo average increased to 1.4987% from 1.4758%.

YUAN: The currency weakened to 7.1212 against the dollar from the previous 7.1118. The PBOC set the dollar-yuan central parity rate higher at 7.1223, compared with 7.0982 set on Monday. The fixing was estimated at 7.1230 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.1100%, up from the close of 2.0800% previously, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index was up 0.54% to 3,285.87, while the CSI300 index rose 0.57% to 3,957.78. The Hang Seng Index increased 0.10% at 20,498.95.

FROM THE PRESS: Authorities must enhance policy consistency in the implementation of China’s package of additional policies, which form a systematic deployment aimed at high-quality development, said the Party-run newspaper People’s Daily in a commentary. Officials should not only focus on the scale of fiscal and monetary countercyclical adjustment, which are quantifiable, but also recognise the important role of policies in the fields of employment, industry, investment and consumption, in particular a series of reform measures to boost market confidence, the newspaper said.

Boosting market confidence is the key to promoting a reasonable recovery in price, which is becoming a top priority, according to an editorial by Yicai.com. The effect of monetary easing has shown a trend of marginal decline since the beginning of the year, as money cannot effectively flow into the real economy through credit expansion amid weak expectations of enterprises and consumers. Additional policies should help repair damaged balance sheets, address overdue corporate accounts, cut taxes and fees, promote the clearing of the real-estate market, and activate home sales, the newspaper said.

Guangdong province, one of the country's economic powerhouses, registered a 3.4% y/y growth in the first three quarters, 21st Century Business Herald reported. The province’s fixed-asset investment fell 3.4% during this period, but the figure rose 3.5% excluding property investment. Investment in equipment and tools maintained growth of 19.1% amid policies aimed at upgrades. The consumer trade-in programme also helped to drive a 1.9% growth in the sales of household appliances, accelerating 1.7 percentage points from H1, as well as an 8.1% gain in electric-vehicle sales, 4.4 pp higher than H1, the newspaper said.