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EXCLUSIVE: Local special bond issuance in China may not jump as sharply as expected in the second half of this year as it becomes harder to select suitable infrastructure projects even amid differing views on the chances of an economic slowdown ahead, policy advisors told MNI.
REALITY CHECK: The recent acceleration in China's consumer price index may have stalled in June as food prices fell again, led by declining pork prices, although higher fuel costs still offered some support to inflation measures, industry analysts told MNI. "CPI may slow to 1.1% (y/y) from May's 1.3% gain as falling food prices largely offset other price increases," Zhang Yu, chief analyst at Huachuang Securities said, as noted that excepting aquatic produce, prices of food items fell across the board.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Thursday. 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 2.0866% from 2.1150% on Wednesday, Wind Information showed. The overnight repo average fell to 1.8056% from the previous 2.0515%.
YUAN: The currency weakened to 6.4811 against the dollar from 6.4639 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.4705, compared with the 6.4762 set on Wednesday.
BONDS: The yield on 10-year China Government Bond was last at 3.0125%, down from Wednesday's close of 3.0725%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.79% to 3,525.50, while the CSI300 index decreased 1.02% to 5,088.26. Hang Seng Index lost 2.89% to 27,153.13.
FROM THE PRESS: China may selectively cut the reserve requirement ratios for medium and small banks at the end of Q3 if the country's inflation starts to fall in July, the China Securities Journal reported citing Wen Bin, the chief researcher at Minsheng Bank. Wen, a frequent commentator for official media, was cited after the State Council said in an executive meeting on Wednesday that monetary policy tools such as RRR cuts will be used to further strengthen financial support to the real economy. The PBOC cut RRRs of rural and urban commercial lenders by 1% over a year ago to 9.5%, compared to RRRs of major national banks at 12.5%, the newspaper said.
The Chinese yuan will be strongly supported for steady movement in the second half should the country's forex reserves stays above USD3.2 trillion, the 21st Century Business Herald said citing analysts. The FX reserves declined for the first time in three months by USD7.8 billion to USD3.214 trillion by end-June, mainly due to the dollar's sharp rebound, which led to declining values of non-dollar assets within the reserves, the newspaper said. The weakened exports reduced trade surplus, and the weakened yuan prompted exporters to delay the settling of foreign currencies, the newspaper said citing analysts.