MNI China Daily Summary: Wednesday, September 06

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY26 billion via 7-day reverse repos, with the rates unchanged at 1.80%. The operation has led to a net drain of CNY356 billion after offsetting the maturity of CNY382 billion reverse repo today, according to Wind Information. The operation aims to keep banking system 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 1.8251% from 1.7411%, Wind Information showed. The overnight repo average increased to 1.5082% from 1.3932%.

YUAN: The currency strengthened to 7.3084 to the dollar from 7.3088 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 7.1969 on Wednesday, compared with 7.1783 set on Tuesday. The fixing was estimated at 7.3108 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.7050%, up from Tuesday's close of 2.6850%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.12% to 3,158.08 while the CSI300 index decreased 0.22% to 3,812.03. The Hang Seng Index was down 0.04% to 18,449.98.

FROM THE PRESS: The yuan will likely not significantly depreciate further with policies to stabilise the currency kicking in and economic expectations improving, wrote Ming Ming, chief economist at CITIC Securities in a commentary. The central bank has abundant policy reserves including the introduction of countercyclical factors, increasing FX risk reserve ratio for forward FX sales and using FX reserves to intervene. However, the yuan may still face certain pressure with the U.S. dollar index likely to remain high as the U.S. economy may continue to show resilience this year amid fiscal expansion. (Source: 21st Century Business Herald)

The Yicai chief economist survey index rose to 50.69 in August as the government implemented economic support policies following July’s politburo meeting. Economists forecasted August’s CPI rate at 0.05% y/y and retail sales of consumer goods up 3.95% y/y. Wu Ge, chief economist at Changjiang Securities, said CPI could remain low in future and policymakers needed demand-side policies to establish a positive feedback loop between prices and economic growth. Another economist expected more policy support in Q4 given the need to expand domestic demand and boost confidence. (Source: Yicai)

China must ensure the futures market is managed according to market mechanisms and sound regulatory oversight, according to Fang Xinghai, vice chairman at the China Securities Regulatory Commission. Speaking at the China Futures Industry Association conference, Fang said the market had previously “paid the price” when the futures industry had deviated away from risk control and regulatory oversight. In future, the industry will focus on serving the real economy, supporting SMEs and promoting green transition and low carbon development. Fang noted the futures market had successfully dealt with imported risks such as skyrocketing prices on the London Nickel market.