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Post-LIBOR Settle Update

MNI (Beijing)

POLICY: China's retail spending will continue to recover on higher incomes and stable employment, though it was temporarily interrupted by recent sporadic outbreaks of localised Covid-19 cases and floods, said Fu Linghui, spokesman of the National Bureau of Statistics on Wednesday.

DATA: Retail sales rose 2.5% y/y in July, plummeting from July's 8.5% gain. The measure grew 18.1% in the Jan-Aug period, slower than 20.7% in Jan-July, according to the NBS. Industrial production grew 5.3% y/y in August, down from the 6.4% gain in July. Fixed-asset investment rose 8.9% y/y in Jan-Aug period, compared to 10.3% in Jan-July.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY600 billion through one-year medium-term lending facility (MLF) and CNY10 billion via 7-day reverse repos with the rate unchanged at 2.95% and 2.20% respectively. The operation left liquidity unchanged given it netted off the equivalent reverse repos and MLF maturing 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) decreased to 2.2212% from the close of 2.2884% on Tuesday, Wind Information showed. The overnight repo average fell to 2.1447% from the previous 2.2843%.

YUAN: The currency weakened to 6.4351 against the dollar from 6.4433 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 6.4492, compared with the 6.4500 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8975%, up from Tuesday's close of 2.8825%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.17% at 3,656.22, while the CSI300 index dropped 1.01% to 4,867.32. Hang Seng Index tumbled 1.84% to 25,033.21.

FROM THE PRESS: The PBOC is expected to renew CNY500 out of the total CNY600 billion MLF maturing on Wednesday while keeping the rate at 2.95%, the Securities Times reported citing analyst Wang Yifeng of Everbright Securities. While there may be a shortage in monetary supply created by banks submitting required reserves as well as more government bond issuances in the last 10 days of the month, greater fiscal disbursement CNY300 billion refinancing to SMEs may help replenish basic money, the newspaper said. China's recent loosening measures may take effect in September, with small recoveries in credit lending, aggregate financing and M2, said the newspaper.

China's growth in exports may begin to cool in Q3, adding pressure to a slowing economy, as western countries' demand has likely peaked and that last year's base of comparison was higher than in the first half, wrote Wu Ge, the chief economist at Changjiang Securities and a former PBOC official, in an article on Yicai.com. Global manufacturing PMI is weakening after a rapid recovery and consumption and real estate investment in the U.S. have started to decline from a previous peak, said Wu. The consumer demand in western developed countries has shifted to services from consumer goods, Wu said.

China's leaders have repeatedly expressed its "unwavering support" for the development of private businesses and it may be wrong to assume that recent changes in market regulations indicated an anti-business policy shift, the 21st Century Business Herald said in a commentary. Policymakers are trying to create a fairer competition environment as the economy matures and as external markets also change, which result in production overcapacity, so business owners should improve corporate governance, seek innovation and boost competitiveness, said the newspaper, referring to the government crackdowns on properties, tutoring and online businesses. The government should also apply quantifiable rules and avoid leaving the market room for misunderstanding, said the newspaper.

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