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MNI China Daily Summary: Wednesday, October 12
POLICY: The People’s Bank of China (PBOC) is set to further expand its low-interest Pledged Supplementary Lending facility to help the three state policy banks fund over CNY1.6 trillion in infrastructure investment and the property bailout announced by the State Council earlier this year, analysts said.
LIQUIDITY: The PBOC injected CNY2 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net drain of CNY65 billion after offsetting the maturity of CNY67 billion reverse 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) rose to 1.5226% from the close of 1.5034% on Tuesday, Wind Information showed. The overnight repo average decreased to 1.1548% from the previous 1.1747%.
YUAN: The currency strengthened to 7.1629 against the dollar from 7.1788 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 7.1103, compared with 7.1075 set on Tuesday.
BONDS: The yield on the 10-year China Government Bond was last at 2.7600%, down from Tuesday's close of 2.7725%, according to Wind Information.
STOCKS: The Shanghai Composite Index rallied 1.53% at 3,025.51, while the CSI300 index gained 1.52% to 3,784.31. The Hang Seng Index edged down 0.78% to 16,701.03.
FROM THE PRESS: Credit expansion in infrastructure, manufacturing and real estate is expected to provide ongoing strong support for growth in credit and total social financing in Q4, the Securities Times reported after new loans and aggregate finance rebounded more than expected in September. Continued pro-growth efforts are required and the central bank could consider guiding the benchmark Loan Prime Rate down further and cutting the reserve requirement ratio, the newspaper said. Policies aimed at encouraging manufacturers to upgrade their equipment helped drive a near CNY1.35 trillion increase in medium and long-term loans, accounting for a significant portion of total new loans of CNY2.47 trillion, the newspaper said citing Minsheng Bank chief economist Wen Bin. Growth in household sector borrowing indicated a recovery in consumer confidence, Wen added.
The PBOC’s recent relaunch of its pledged supplementary lending program may provide funds to ensure the delivery of unfinished housing projects, Caixin reported. The market had expected the return of PSL as policymakers had announced CNY1.6 trillion of policy bank-backed financial instruments to boost infrastructure and ensure housing project delivery but without specifying the funding source, said Caixin. The previous use of PSL funding to deliver underground pipeline and water conservancy projects suggests it may be used to help fund infrastructure construction, Caixin said citing CITIC Securities analysts who expect larger scale use of PSL. The PBOC issued a net CNY108.2 billion of PSL to three state-owned policy banks in September, after pausing it for two and a half years.
China insists on maintaining its dynamic “zero-Covid” policy as it is the most effective way to manage the epidemic and avoid the potentially high costs associated with uncontrolled outbreaks, said the Party-run People’s Daily in a commentary. Vaccination rates in China are not yet at a sufficient level to protect against severe illness and death as only 86.26% of the population above 60 years old have received booster shots, and there are a considerable number of children and adults not suitable for vaccination, the newspaper said. Some countries choose to "coexist with the virus" as they are unable to bear the cost and failed to keep it controlled in the early stage, but China is capable of preventing any outbreak, the newspaper said.
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