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MNI China Press Digest Aug 16:Lower LPR, Yuan Bonds, FX Market

MNI (Singapore)

MNI summarises the key stories from the Chinese press on Tuesday.

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The following lists highlights from Chinese press reports on Tuesday:

  • China’s benchmark Loan Prime Rates are likely to be driven lower next week following the PBOC’s 10 bps cut to the interest rate applied to the medium-term lending facility and the recent rapid decline in capital costs, the Securities Daily reported, citing analysts. The five-year LPR, that many lenders base their mortgage rate on, could see a reduction of more than 10 bps in an effort to boost mortgage demand amid a cooling housing market, the newspaper noted, citing Wang Qing, analyst with Golden Credit Rating. The PBOC is set to release August's LPR quotations next Monday, with the one-year and five-year LPRs currently sitting at 3.70% and 4.45%, respectively.
  • Foreign institutional investors brought a net ~CNY6.6 billion of yuan bonds in July, after four consecutive months of net sales, the China Securities Journal reported, citing data released by the China Foreign Exchange Trade System. Foreign investors brought ~CNY518.8 billion of yuan bonds in July, selling ~CNY512.3 billion, as the China-U.S. interest spread rebounded, and the yuan remained generally stable, the newspaper said, citing analysts. Foreign investors will steadily increase their holdings of yuan bonds in the long-term, with demand supported by Chinese economic fundamentals, the analysts said. They currently hold a total of CNY3.51 trillion of bonds purchased in the interbank market, accounting for only ~3% of China’s bond market, the newspaper said.
  • China’s foreign exchange market will continue to operate in a smooth manner, with domestic FX supply and demand remaining basically balanced, said Wang Chunying, deputy director of the State Administration of Foreign Exchange, according to a statement on the SAFE website issued late Monday. In July, the amount of cross-border receipts and payments by companies and individuals stood at USD514.3 billion and USD525.5 billion, respectively, representing a small deficit stemming from seasonal dividend distributions, said Wang.
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The following lists highlights from Chinese press reports on Tuesday:

  • China’s benchmark Loan Prime Rates are likely to be driven lower next week following the PBOC’s 10 bps cut to the interest rate applied to the medium-term lending facility and the recent rapid decline in capital costs, the Securities Daily reported, citing analysts. The five-year LPR, that many lenders base their mortgage rate on, could see a reduction of more than 10 bps in an effort to boost mortgage demand amid a cooling housing market, the newspaper noted, citing Wang Qing, analyst with Golden Credit Rating. The PBOC is set to release August's LPR quotations next Monday, with the one-year and five-year LPRs currently sitting at 3.70% and 4.45%, respectively.
  • Foreign institutional investors brought a net ~CNY6.6 billion of yuan bonds in July, after four consecutive months of net sales, the China Securities Journal reported, citing data released by the China Foreign Exchange Trade System. Foreign investors brought ~CNY518.8 billion of yuan bonds in July, selling ~CNY512.3 billion, as the China-U.S. interest spread rebounded, and the yuan remained generally stable, the newspaper said, citing analysts. Foreign investors will steadily increase their holdings of yuan bonds in the long-term, with demand supported by Chinese economic fundamentals, the analysts said. They currently hold a total of CNY3.51 trillion of bonds purchased in the interbank market, accounting for only ~3% of China’s bond market, the newspaper said.
  • China’s foreign exchange market will continue to operate in a smooth manner, with domestic FX supply and demand remaining basically balanced, said Wang Chunying, deputy director of the State Administration of Foreign Exchange, according to a statement on the SAFE website issued late Monday. In July, the amount of cross-border receipts and payments by companies and individuals stood at USD514.3 billion and USD525.5 billion, respectively, representing a small deficit stemming from seasonal dividend distributions, said Wang.