MNI China Daily Summary: Wednesday, August 14

EXCLUSIVE: The People’s Bank of China (PBOC)’s moves to deleverage the fixed-income market and cool the bond rally will likely have little impact on the downward momentum of CGB yields thanks to the sluggish economic recovery, policy advisors and traders told MNI, noting the Bank wanted to temper speculation rather than reverse the bullish trend.

POLICY: China’s copper cathode rod output reached 851,000 metric tonnes in July, up 47,900 mt from June, according to the Shanghai Metals Market (SMM).

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY369.2 billion via 7-day reverse repo, with rate unchanged at 1.70%. The operation has led to a net injection of CNY369.2 billion as no reverse repos maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.8799% from the close of 1.8798% on Tuesday, Wind Information showed. The overnight repo average fell to 1.8499% from 1.9301%.

YUAN: The currency strengthened to 7.1484 against the dollar from Tuesday's close of 7.1694. The PBOC set the dollar-yuan central parity rate lower at 7.1415 on Wednesday, compared with 7.1479 set on Tuesday. The fixing was estimated at 7.1500 by Bloomberg survey today.

BONDS: The yield on the 10-year China Government Bond was last at 2.1750%, down from Tuesday's close of 2.2225%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index fell 0.60% to 2,850.65, while the CSI300 index decreased 0.75% to 3,309.24. The Hang Seng Index lost 0.35% to 17,113.36.

FROM THE PRESS: New loans rose CNY260 billion in July, according to a 21st Century Business Herald report. Wen Bin, chief economist at China Minsheng Bank, noted new loan issuance had been affected by insufficient demand, seasonal factors and a regulatory crackdown on inflated deposits and debt. Household loans decreased CNY210 billion in July with short-term borrowing down CNY216 billion and medium- and long-term loans up CNY10 billion. Though summer tourism had increased services consumption, residents’ uncertainty about employment and income growth continued to hinder household balance sheet expansion, said Wen. Longer-term residential loan growth was hindered by weak home sales and mortgage early repayments, he added.

China’s central bank has increased its re-loan quota for supporting agricultural and small businesses by CNY100 billion across 12 provinces to support extreme weather prevention and reconstruction, Yicai reports. Authorities will offer a one-year re-loan rate at 1.75%, significantly lower than the one-year medium-term lending facility’s 2.3%, Yicai noted. Wang Qing, chief macro-analyst at Golden Credit Rating International, said the measure would add to positive growth of total credit in the third quarter.

The China Express Delivery Development Index reached 393.9 in July, up 11.8% y/y, according to the State Post Bureau. Express deliveries hit 100 billion items 71 days faster than in 2023, underscoring consumer trends to increase online shopping especially during holidays and promotional seasons, said Fu Yifu, researcher at the Xingtu Financial Research Institute. Average monthly volumes have exceeded 13 billion items this year, with average monthly income over CNY100 billion, both historical highs, the bureau said. (Source: Securities Daily)