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LIQUIDITY: Liquidity conditions across China’s interbank markets eased in April, boosted by the central bank cutting banks’ reserve requirement ratio in order to boost a slowing economy, the latest MNI Liquidity Condition Index shows. The Liquidity Condition Index stood at 30.0 in April, easing from 63.3 in March, with 40.0% of traders reporting an improvement in conditions. The higher the index reading, the tighter liquidity appears to survey participants.
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) increased to 1.6658 from the close of 1.6111% on Tuesday, Wind Information showed. The overnight repo average fell to 1.3007% from the previous 1.3063%.
YUAN: The currency weakened to 6.5569 against the dollar from 6.5473 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 6.5598, compared with 6.5590 set on Tuesday.
BONDS: The yield on the 10-year China Government Bond was last at 2.8600%, up from Tuesday's close of 2.8475%, according to Wind Information.
STOCKS: The Shanghai Composite Index rallied 2.49% at 2,958.28, while the CSI300 index rose 2.94% to 3,895.54. Hang Seng Index edged up 0.06% to 19,946.36.
FROM THE PRESS: The PBOC is likely to further reduce the foreign exchange deposit reserve ratio for banks, and use measures such as raising the FX risk reserve ratio and restarting counter-cyclical policies should the depreciation of the yuan continue, wrote Guan Tao, former forex official and chief economist at BOC Securities in a blog post. The PBOC’s move to cut the FX deposit reserve ratio by one percentage point on Monday is more of a signal to express concern about the current sharp yuan drop, and it will help curb any momentum of shorting the yuan, Guan said.
China will step up infrastructure projects to drive economic growth, Xinhua News Agency reported late Tuesday citing a top economics meeting chaired by President Xi Jinping. Investments would be brought forward for projects that benefit industrial growth and safeguard national security, the meeting said. Optimising transportation, and oil and gas pipeline networks as well as new types of infrastructure, including computing platforms and broadband would be included, according to the meeting. Financing needs will be met and fiscal spending would be expanded, the meeting said.
China should increase counter-cyclical economic measures and activate reserve policies amid growing expectations for the economic growth to bottom in Q2, the China Securities Journal reported citing analysts. Expanding investment, restoring consumption, stabilising foreign trade, and smoothening supply chain logistics will become the main focus, the newspaper said. It is expected that infrastructure investment, the key driver this year, may increase 10% in H1, and grow 5-7% for the whole year, the newspaper said citing analysts.
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