MNI China Daily Summary: Monday, August 4

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY544.8 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY49.0 billion after offsetting maturities of CNY495.8 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4518% from 1.4242%, Wind Information showed. The overnight repo average increased to 1.3146% from 1.3139%. 

YUAN: The currency strengthened to 7.1766 against the dollar from the previous 7.2106. The PBOC set the dollar-yuan central parity rate lower at 7.1395 on Monday, compared with 7.1496 set on Friday. The fixing was estimated at 7.1746 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7060%, down from the previous close of 1.7275%, according to Wind Information. 

STOCKS: The Shanghai Composite Index edged up 0.66% to 3,583.31, while the CSI300 index increased 0.39% to 4,070.70. The Hang Seng Index rose 0.92% to 24,733.45. 

FROM THE PRESS: China’s central bank is expected to balance stabilising growth with risk mitigation carefully, emphasing technological innovation and financial stability alongside the flexible application of policy tools and structural reforms, according to Tian Lihui, professor of finance at Nankai University, following the People’s Bank of China’s 2025 second-half work conference last week. Tian noted that the PBOC will likely deploy measures such as reserve requirement ratio (RRR) cuts and the Medium-term Lending Facility (MLF) to ensure ample liquidity, with the primary focus in H2 on revitalising existing funds through optimising credit allocation, curbing idle capital and enhancing capital efficiency.

China’s July Politburo meeting emphasised the need to maintain policy continuity while enhancing flexibility, allowing room for timely reinforcement, according to Guan Tao, former senior official at the State Administration of Foreign Exchange. He noted this approach relies on the proactive monitoring of economic and financial conditions, backed by a robust policy toolkit. The meeting’s call to fully implement a proactive fiscal policy and moderately accommodative monetary stance suggests limited need for near-term stimulus, reflecting stronger-than-expected economic performance in the first half of 2025, rather than signalling market weakness.

Firms seeking to list on the Hong Kong Stock Exchange (HKEX) must now allocate at least 40% of their initially planned IPO shares to the book building placement tranche, according to new rules released by the exchange. Additionally, issuers can choose between mechanism A, which raises the maximum public subscription clawback from 20% to 35%, or mechanism B, which allows a fixed public allocation of between 10% and 60%, with no clawback mechanism. Industry insiders said the reforms aim to dismantle barriers and ease restrictions for issuers, improve IPO pricing efficiency and strengthen the global competitiveness of Hong Kong’s IPO market. (Source: Securities Daily)