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Free AccessMNI China Daily Summary: Wednesday, May 2
TOPS NEWS: China's currency yuan rose to the highest level in about a month
on a trade-weighted basis against the currencies of its major trading partners,
according to weekly data released by the People's Bank of China (PBOC). The
CFETS Weekly RMB Index, which measures the yuan relative to a basket of 24
currencies, increased 0.39% last week to 97.37. As of April 27, the yuan gauge
has recorded a 2.66% gain year-to-date, up from 94.85 on Dec 29, according to
MNI's calculations.
DATA: China's manufacturing output expanded at a slightly faster pace,
according to April's Caixin PMI. Increase in total new work slowed amid renewed
decline in export sales. Staff numbers continued to fall, despite further rise
in backlogs. The most interesting point was that overall operating conditions
across China's manufacturing sector continued to improve in April. Uncertainty
in exports has increased significantly, and the dependence of the Chinese
economy on domestic demand is rising.
LIQUIDITY: The PBOC issued CNY200 billion in 7-day reverse repos on
Wednesday, with the rate unchanged at 2.55%, the central bank said on its
website. That resulted in no changes to liquidity as the same amount of reverse
repos matured today. There will be a total of CNY380 billion reverse repos
maturing this week. CFETS-ICAP's money-market sentiment index closed at 38 on
Saturday, down from 48 on Friday.
MONEY MARKET RATES: 7-day repo average dropped 2.9360% from the 2.9863% on
Saturday, after PBOC left liquidity unchanged. The overnight repo average
decreased to 2.7085% from 2.7837% on Saturday.
YUAN: The yuan fell against the U.S. dollar after the PBOC set a weaker
daily fixing. The yuan fell to 6.3579 against the U.S. unit, compared with the
official closing price of 6.3439 yesterday. The PBOC set the yuan central parity
rate at 6.3670 Wednesday, weaker than the 6.3393 set before three-day holiday.
The central bank has set the fixing weaker for eight times in past nine trading
days, marking the biggest daily drop since Feb 9.
BONDS: The yield on benchmark 10-year China Government Bond was last at
3.6750%, much higher than the previous close of 3.6350%, according to Wind
Information.
STOCKS: Shares slightly dropped in Shanghai, led lower by information
technology companies on U.S. sanctions on Chinese tech companies. The benchmark
Shanghai Composite Index closed 0.03% lower at 3,081.18. Hong Kong's Hang Seng
Index declined 0.34% to 30,703.23.
FROM THE PRESS: The financial sector should be regulated based on
regulatory goals instead of based on different sectors to offset regulatory
arbitrage, China Securities Journal reported citing Sun Guofeng, head of the
financial research institute of the PBOC. Three main factors cause financial
risks according to Sun: fragile liquidity in the banking system as the existence
of shadow banks conceals the real balance sheets of banks, overexpansion of
assets, boosted by shadow banks, bank loans supporting transactions of existing
assets, which can lead to asset bubbles, Sun said according to the Journal.
The buffer time for financial institutions to transform and change their
WMP businesses according to the finalized WMP rules was extended to two years
and a half, longer than the market expected, 21st Century Business Herald
reported. The rules clearly define standardized and non-standardized WMP
businesses and show that regulators are trying to tackle risks triggered by
non-standardized financial products, the newspaper said citing an unidentified
WMP manager of a large Chinese securities company. Former PBOC official told the
newspaper the rules show financial regulators do not want public funds to be
invested in non-standardized businesses, which could bring more risks and
intensify the shadow banking problem.
The property market cooled during the Labor Day holiday relative to the
period in the past years, Economic Information Daily reported. Various property
companies gave promotions for home purchasers yet failed to create a rebound,
the newspaper said. Data from Centaline Group show residential property
transactions in the largest tier-one cities dropped more than 50% y/y to 360
units during the holiday, while it was down around 30% in tier-two cities, the
newspaper said. The market is still sluggish although m/m growth of property
transactions has recently been rising in most cities, Zhang Dawei, chief analyst
of Centaline Group was cited as saying. ***Comments: The recent m/m rebound of
property sales, especially of residential homes, shows demand for housing is
still strong in China. However, with tight controls still in place current
market transactions can't truly reflect the real demand and supply.
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]
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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.