MNI China Daily Summary: Monday, June 6

DATA: Caixin China's services PMI for May rebounded sharply by 5.2 points to 41.4, but is still below the breakeven 50 and stands at the second-lowest level since March 2020 amid Covid-19 outbreaks, financial publisher Caixin said on Monday.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.10%. The operation has led to a net drain of CNY10 billion after offsetting the maturity of CNY20 billion repos 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) increased to 1.6479% from 1.6274% on June 2, the last working day before the Dragon Boat Festival holiday, Wind Information showed. The overnight repo average rose to 1.4408% from the previous 1.4233%.

YUAN: The currency strengthened to 6.6457 against the dollar from 6.6750 on June 2. The PBOC set the dollar-yuan central parity rate lower at 6.6691, compared with 6.7095 set on Thursday.

BONDS: The yield on 10-year China Government Bond was last at 2.8175%, up from the previous close of 2.8050%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 1.28% to 3,236.37 while the CSI300 index gained 1.87% to 4,166.09. Hang Seng Index rallied 2.71% to 21,653.90.

FROM THE PRESS: Domestic tourism accelerated in China during the three-day Dragon Boat Festival last week though still down on year, with Shanghai and Beijing returning to Top 10 traveling destinations as Covid-19 curbs ease, the China Securities Journal reported. Revenue from domestic tourism was CNY25.82 billion during the holiday, falling 12.2% y/y and recovering to 65.6% of the pre-pandemic level, the newspaper said citing data by the Ministry of Culture and Tourism. A total of 79.61 million trips were made across the country, a decrease of 10.7% y/y and 86.7% of the same period in 2019, the newspaper said.

New yuan loans likely rebounded sharply in May to as much as around CNY1.5 trillion from April’s over four-year low of CNY645.4 billion, as top regulators repeatedly called for credit growth to support the economy, the Securities Daily reported citing analysts. Bill financing and short-term corporate loans may still be the main support, while medium and long-term corporate loans are expected to improve slightly, the newspaper said citing Tan Yiming, chief fixed-income analyst at Minsheng Securities. Personal loans may remain sluggish amid weakened incomes and low appetite for spending on home purchases, Tan was cited as saying.

China should plan and introduce more extraordinary incremental policies to help small businesses and people affected by the epidemic to improve their cash flow, wrote Guan Tao, chief economist at BOC Securities in a blog post. Currently, the market is reluctant to borrow, and banks are afraid to lend due to weaker cash flows at companies and for individuals entering the third year of Covid-19 outbreaks, said Guan. If the private sector continues to add leverage, it could erode their financial health and will take a long time for companies and individuals to repair their balance sheets in the future, which will drag down the pace of economic recovery, said Guan.