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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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Free AccessMNI China Daily Summary: Wednesday, June 29
POLICY: China is expected to issue over CNY1 trillion of Special Treasury Bonds (SBTs) in the third quarter to fill a fiscal gap and to help meet economic and employment targets, policy advisors and market analysts said, calling on the central bank increase liquidity to accommodate the massive debt sale.
LIQUIDITY: China’s economy is recovering from the recent Covid-triggered downturn, with many survey indicators picking up and liquidity conditions tightened into the half-year end, the latest MNI Liquidity Conditions Index shows. The Liquidity Condition Index, rose to 57.8 in June from 12.5 previously, the highest reading in three months. One-in-five traders saw conditions “tighter than last month” as the year’s 6-month mark approached.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY100 billion via 7-day reverse repos with the rate unchanged at 2.1%. This led to a net injection of CNY90 billion after offsetting the maturing CNY10 billion reverse repos today, according to Wind Information. The operation aims to keep liquidity stable at the end of mid-year, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.0565 from the close of 1.9698% on Tuesday, Wind Information showed. The overnight repo average decreased to 1.3482% from the previous 1.4267%.
YUAN: The currency weakened to 6.6972 against the dollar from 6.6876 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 6.7035 on Wednesday, compared with 6.6930 set on Tuesday.
BONDS: The yield on the 10-year China Government Bond was last at 2.8750%, down from Tuesday's close of 2.8860%, according to Wind Information.
STOCKS: The Shanghai Composite Index lost 1.40% at 3,361.52, while the CSI300 index fell 1.54% to 4,421.36. Hang Seng Index tumbled 1.88% to 21,996.89.
FROM THE PRESS: The Chinese economy may grow around 4.8% in 2022, and could reach 5%-5.5% if supported by strong policies such as the issuance of special treasury bonds in H2, Yicai.com reported citing a report by Zhixin Investment Research Institute. If issuing CNY1.5 trillion special treasury bonds, the infrastructure investment growth in 2022 could increase by 24.8%, otherwise the figure may rise by 13.7%, the report said. The central bank is expected to cut the reserve requirement ratio in H2 to ease banks’ pressure on capital costs, the report said.
China reduced the length of mandatory quarantine for inbound travelers to seven days plus three more days of health monitoring at home, from the previous 14 days quarantine plus seven days home monitoring, the 21st Century Business Herald reported citing the latest Covid-19 prevention and control policy guidelines released on Tuesday. The relaxation is made to accommodate the shortened incubation period for the Omicron variant, mostly 2-4 days, the newspaper said citing Lu Hongzhou, president of Shenzhen Third People's Hospital. The new guidelines have added requirements to "control the epidemic to the smallest scope in the shortest time, with the lowest cost”, emphasizing targeted measures, the newspaper said.
Many banks in China including China Construction Bank, and China Merchants Bank see time deposit interest rates inverted and yields on large-denomination certificates of deposit continue to decline, Yicai.com reported. Banks are facing pressure on the net interest margin brought about by lower loan interest rates, coupled with sufficient liquidity and the lack of effective credit demand, their motivation to absorb deposits, especially medium- and long-term high-cost deposits, has been greatly weakened, the newspaper said citing analysts. Such pressure may ease in H2 as banks further balance the cost of their asset side and liability side, with recovering credit demand, the newspaper said citing analysts.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.