MNI China Liquidity Index Higher In June

Liquidity tightened across China's interbank markets in June, as cash demand from special bond issuance, tax payments and quarter-end regulatory needs alongside maturing central bank injections drained funds from the system, the latest MNI Liquidity Conditions Index shows.

The Liquidity Condition Index rose for a fourth straight month, surging to 81.3 in June from 30.0 in May, hitting the highest level in five months. with almost two-thirds of respondents seeing tighter conditions than in recent months.

The higher the index reading, the tighter liquidity appears to survey participants.

"(Conditions) are tightening obviously as it's coming to the end of quarter/half year," a trader with state-owned bank based in Shanghai told MNI.

--ECONOMY RECOVERING

The Economy Condition Index rose for a second consecutive month to 78.1 inJ une, the highest level seen this year, indicating the recovery is picking up pace, with 68.8% of survey participants seeing the situation improving.
"Economic indicators like industrial production and investment are edging up, though retail sales were a bit lower than expectations," a fund manager based in Nanjing said,

--TIGHTER POLICY

The PBOC Policy Bias Index rose to 59.4 in June from previous 33.3, with 68.8% of the traders believing the recent 'two sessions' had stabilized monetary policy expectations -- "prudent" but more flexible and appropriate to support the real economy.
The Guidance Clarity Index climbed up to 71.9 in June, compared with the 70.0 in May, as more traders see the PBOC conducting better communication with the financial markets.