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MNI China Press Digest June 17: PBOC, M1, Northbound Funds

MNI (Singapore)
MNI (Beijing)

MNI picks key stories from today's China press

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Highlights from Chinese press reports on Monday:

  • The People’s Bank of China has many conventional monetary-policy tools it can use before resorting to the purchase and sale of treasury bonds to regulate liquidity and it may need to work on better market communication in future, Securities Daily reported citing analysts. The recent issuance of 50-year ultra-long-term special treasury bonds drove the coupon rate down to 2.53%, lower than that of the previously issued 2.57% 30-year bonds. The inversion sparked discussion about whether the PBOC would sell some of its longer-term bond holdings to curb the bull bond market.
  • The rebound of the M1 money supply, which fell further by 4.2% y/y in May, depends on home sales, fiscal spending and exporters’ settlement, Shanghai Securities News reported citing Liu Lu, chief fixed-income analyst at Ping An Securities. Some current deposits were diverted to the financial management market as deposit rates declined, while the central bank’s effort to crack down on irregular deposits also decelerated M1, the newspaper said. Meanwhile, China’s M1 calculation, which only includes cash and corporate demand deposits, should be expanded to include residents’ monetary funds and financial products that can be redeemed at any time, the newspaper added.
  • Major foreign institutional investors are increasing their positions in A-shares and Hong Kong stocks as they bet on quickening economic recovery in H2, Shanghai Securities News reported. As of June 12, northbound funds have made a cumulative net purchase of CNY77.5 billion this year, far exceeding the net purchase amount of CNY43.7 billion in 2023. The electronics, non-ferrous metals and banking sectors have all received more than CNY10 billion inflows in Q2, while further investment opportunities may focus on artificial intelligence, high-end manufacturing and the real-estate sector, the newspaper said.
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Highlights from Chinese press reports on Monday:

  • The People’s Bank of China has many conventional monetary-policy tools it can use before resorting to the purchase and sale of treasury bonds to regulate liquidity and it may need to work on better market communication in future, Securities Daily reported citing analysts. The recent issuance of 50-year ultra-long-term special treasury bonds drove the coupon rate down to 2.53%, lower than that of the previously issued 2.57% 30-year bonds. The inversion sparked discussion about whether the PBOC would sell some of its longer-term bond holdings to curb the bull bond market.
  • The rebound of the M1 money supply, which fell further by 4.2% y/y in May, depends on home sales, fiscal spending and exporters’ settlement, Shanghai Securities News reported citing Liu Lu, chief fixed-income analyst at Ping An Securities. Some current deposits were diverted to the financial management market as deposit rates declined, while the central bank’s effort to crack down on irregular deposits also decelerated M1, the newspaper said. Meanwhile, China’s M1 calculation, which only includes cash and corporate demand deposits, should be expanded to include residents’ monetary funds and financial products that can be redeemed at any time, the newspaper added.
  • Major foreign institutional investors are increasing their positions in A-shares and Hong Kong stocks as they bet on quickening economic recovery in H2, Shanghai Securities News reported. As of June 12, northbound funds have made a cumulative net purchase of CNY77.5 billion this year, far exceeding the net purchase amount of CNY43.7 billion in 2023. The electronics, non-ferrous metals and banking sectors have all received more than CNY10 billion inflows in Q2, while further investment opportunities may focus on artificial intelligence, high-end manufacturing and the real-estate sector, the newspaper said.