MNI China Daily Summary: Tuesday, June 1

POLICY: China's banking regulator will continue to crack down on bubbles in the property market, preventing sharp house price volatility and boost support for the rental housing sector, officials of China Banking and Insurance Regulatory Commission told reporters Tuesday.

DATA: The Caixin China PMI for May edged up 0.1 point to 52.0 from the previous month, the strongest level so far in 2021 and the 13th consecutive month above the breakeven 50.0 level, indicating that manufacturing activity continued to recover steadily, publisher Caixin said in an email announcement on Tuesday.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. The operation left liquidity unchanged given it netted off CNY10 billion reverse repos 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 2.2064% from Monday's close of 2.5786%, Wind Information showed. The overnight repo average fell to 2.1778% from 2.2818% on Monday.

YUAN: The currency weakened to 6.3759 against the dollar from Monday's close of 6.3607, following the central bank's latest move to raise FX reserve requirement ratio to slow the yuan's appreciation process. The PBOC set the dollar-yuan central parity rate lower at 6.3572, compared with the 6.3682 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 3.0750%, down from Monday's close of 3.1300%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.26% to 3,624.71, while the CSI300 index edged up 0.19% to 5,341.68. The Hong Kong's Hang Seng Index rallied 1.08% to 29,468.00.

FROM THE PRESS: The PBOC's announcement on Monday raising financial institutions' FX reserve requirement ratios to 7% from 5% will tighten U.S. dollar supply in the domestic FX market by about USD20 billion, not a large amount considering the average daily trading volume was around USD41.1 billion last week, CICC said in a report. The move conveyed the PBOC's intention to maintain two-way fluctuations of the yuan. Previous similar moves to reduce the expectation for yuan's gain usually followed by the dollar gaining as much as 0.4% within a week, the report said. As of April, the balance of foreign exchange deposits in financial institutions is approximately US$1 trillion, the report added.

China's first batch of nine REIT products ranged from CNY2.3 to CNY13.38 per share, with expected dividend yields from 4% to 12%, said Quanshang Zhongguo, a WeChat blog run by Securities Times. They were sold out in half a day yesterday in a public offering, with some more than 40 times oversubscribed, the newspaper said. These REIT products focus on high-quality infrastructure projects in key areas, with five to be invested in industrial parks, warehouses, and logistics, the newspaper said.

China should consider cutting taxes and lower high housing and education costs to encourage the younger generations to have more children, said the 21st Century Business Herald in an editorial after the government endorsed having three children. Family with two or more children should be taxed as a whole, not individually, and enjoy some tax reduction, which will encourage middle-income urban residents to have children, the newspaper said. China's declining fertility rate has a strong correlation with rising housing prices while having three children requires larger housing that is difficult to achieve in big cities, the newspaper said.