MNI China Daily Summary: Thursday, August 14

POLICY: Chinese pork prices, an important component in the nation’s CPI measure, fell 1.4% m/m during the first 10 days of August, National Bureau of Statistics data showed.

LIQUIDITY: The People's Bank of China conducted CNY128.7 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY32 billion after offsetting maturities of CNY160.7 billion, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4424% on Thursday from 1.4522%, Wind Information showed. The overnight repo average increased to 1.3173% from 1.3164%.

YUAN: The currency strengthened to 7.1730 against the dollar, from 7.1755 at Wednesday's close. The PBOC set the dollar-yuan central parity rate lower at 7.1337, compared with 7.1350 on Wednesday. The fixing was estimated at 7.1753 by Bloomberg survey.

BONDS: The yield on 10-year China Government Bonds was last at 1.6850%, up from Wednesday's close of 1.6800%, according to Choice Information.

STOCKS: The Shanghai Composite Index fell 0.46% to 3,666.44, while the CSI300 index declined 0.08% to 4,173.31. The Hang Seng Index dropped 0.37% to 25,519.32.

FROM THE PRESS: Any observation of loan data should focus not only on the monthly increase, but also take into account the cumulative rise and the growth rate of balances, Securities Daily reported, citing analysts, after July new yuan loans fell by CNY50 billion, the first fall in the month since 2005. The loan balance grew by 6.9% y/y by end-July, still significantly higher than the nominal economic growth, indicating credit support to the real economy has been solid for some time, analysts said. The newspaper noted that if the amount of loans issued and recovered is large over a period of time, the final increase in loan balance may not be high, but the financing needs were fully met.

A recent rally in A-shares is offering an exit window for venture capital institutions, now the main force in shareholding reductions, Yicai.com reported. Most VC funds have a five-eight-year exit cycle, with divestments freeing up capital for new projects, Tian Lihui, dean of the Institute of Financial Development at Nankai University, told the outlet. Since August, more than 300 listed companies have announced plans to cut holdings, Wind Information data showed. The Shanghai Composite Index hit a four-year intraday high of 3,688.63 on Aug 13 and is up 9.9% year-to-date.

Foreign capital allocation to domestic yuan bonds has accelerated again since the second half of 2024, driven by increasing preference for non- dollar assets and the Chinese bond market’s lower correlation with other developed countries, Securities Daily reported, citing analysts. By the end of June, the custodial balance of overseas institutions in China's bond market was CNY4.3 trillion, accounting for 2.3% of the total. A new round of sustained capital inflows is expected in the next three-to-four years, after a peak in 2018-2022 when foreign institutions' bond holdings increased from USD200 billion to USD600 billion, the newspaper said, citing analysts.