MNI China Press Digest May 21: Bonds, Trade, LPR

Highlights from Chinese press reports on Tuesday:

• Foreign investors may further increase their allocation to China’s bond market, as the yuan faces less depreciation pressure amid weakening overseas economic data and China may have greater easing space in monetary policy, expected to drive short-term yields down, Shanghai Securities News reported citing Xu Zhaoting, general manager at Deutsche Bank’s China Investment Banking Department. Foreign institutional investors have increased their holdings of Chinese bonds for eight consecutive months to April, with a net purchase of domestic bonds and stocks recording CNY124.7 billion and CNY45.1 billion. By end-April, foreign institutions held CNY4.05 trillion of bonds in China’s interbank market, accounting for about 2.9% of the total custody volume.
• China will take 30 measures to expand export credit insurance aimed at accelerating international trade, the Ministry of Commerce has announced. Authorities will ensure good use of advance payment insurance and loss compensation to help foreign trade momentum, especially for SMEs, the notice said. Exporters will benefit from enhanced industry underwriting capabilities, and policy will look to enhance trade with Belt and Road nations. (Source: Yicai)
• Banks may lower the LPR later this year due to China's low inflation, but slower monetary easing in developed economies could delay action, says Mingming, chief economist at CITIC Securities. Wen Bin, chief economist at Minsheng Bank, added banks faced declining net interest margins, making a short-term LPR cut unlikely. Banks’ decision to hold the LPR steady this month will help alleviate arbitrage behaviour and improve the efficiency of capital operation, Wen added. (Source: Securities Daily)