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Onshore Markets Return From LNY Break, Equities Expected To Rise

CNH

China onshore markets return today from the LNY break. USD/CNH ended last Friday around the 7.2130 region, remaining within recent ranges. The onshore spot close for USD/CNY, prior to the LNY break, was 7.1936.

  • The early focus today will on local equity trends, which are expected to be positive. Spending and travel anecdotes for the LNY period were strong and we saw the Golden Dragon index rise +4.31% last week in US trade, while onshore markets were shut.
  • Over the weekend the 1yr MLF rate was held steady at 2.5%, while MLF volumes were at 500bn yuan. Both were in line with expectations, although there had some speculation that the MLF rate cut be cut given recent PBoC rhetoric.
  • Note tomorrow we have the 5yr and 1yr LPR outcomes due. The consensus is for the 5yr rate to come down by 10bps to 4.10%. The 1yr is expected to be held steady at 3.45%.
  • For USD/CNH, the 20-day EMA is near 7.2070, while the 100-day sits close to 7.2020. Further south the 200-day is near 7.1730. Note post US CPI highs in USD/CNH came in at 7.2335/40.
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