MNI EM China Daily Summary: Tuesday, March 26

EXCLUSIVE: Weak sentiment, U.S dollar strength and the People’s Bank of China’s (PBOC) continued support for the yuan, unless other currencies extend their weakness, will keep volatility elevated and the central bank on guard over Q2, traders and advisors told MNI.

LIQUIDITY: The PBOC conducted CNY150 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to a net injection of CNY145 billion after offsetting CNY5 billion maturity today, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9766% from 1.9027%, Wind Information showed. The overnight repo average decreased to 1.7739% from the previous 1.7770%.

YUAN: The currency weakened to 7.2194 against from a close of 7.2084 on Monday. The PBOC set the dollar-yuan central parity rate lower at 7.0943, compared with 7.0996 set on Monday. The fixing was estimated at 7.2019 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.4200% unchanged from Monday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index increased 0.17% to 3,031.48 while the CSI300 index rose 0.51% to 3,543.75. The Hang Seng Index was up 0.88% to 16,618.32.

FROM THE PRESS: The People’s Bank of China will strengthen countercyclical adjustments and take maintaining price stability and promoting a moderate price rebound as important considerations, said PBOC Governor Pan Gongsheng at the China Development Forum. Ample policy space and a rich reserve of tools exists, he said. Pan added there have been some positive signals in the real-estate market, and volatility has had limited impact on the financial system. (Source: PBOC Website)

China will focus on combining expanding domestic demand with supply-side structural reform to promote steady growth, Securities Times reported citing advisors. Fiscal resources including CNY4.06 trillion of deficits, CNY3.9 trillion of local government special bonds and CNY1 trillion of ultra-long-term special treasury bonds, should be used to support technological innovation, industrial transformation and infrastructure investment to boost demand, said Wang Yiming, vice chairman of the China Center for International Economic Exchanges.

Policymakers will support international firms to establish R&D centres in China and encourage partnerships with domestic companies, according to Jin Zhuanglong, minister of Industry and Information Technology. Speaking at the China Development Forum, Jin said foreign companies have an important role in stabilising China's industrial growth and promoting high-quality development. The government would provide better services and guarantees for scientists, entrepreneurs, and investors from various countries to innovate and start businesses in China, Jin added. (Source: 21st Century Business Herald)