MNI China Daily Summary: Thursday, October 16

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY236 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY376 billion after offsetting maturities of CNY612 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4225% from 1.4170% on Wednesday, Wind Information showed. The overnight repo average increased to 1.3139% from the previous 1.3138%.

YUAN: The currency weakened to 7.1249 against the dollar, from 7.1238 at Wednesday's close. The PBOC set the dollar-yuan central parity rate lower at 7.0968, compared with 7.0995 set on Wednesday. The fixing was estimated at 7.1208 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8370%, down from Wednesday's close of 1.8375%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.10% to 3,916.23, while the CSI300 index rose 0.26% to 4,618.42. The Hang Seng Index was down 0.09% to 25,888.51.

FROM THE PRESS: Higher prices for home appliances, mobile phones and gold offset the wider year-on-year decline of food in September, helping lift China’s CPI to -0.3% year-on-year from -0.4% in August, according to Feng Lin, executive director at China Golden Credit Rating. Wen Bin, chief economist at China Minsheng Bank, noted CPI fell 0.1% year-on-year in the first nine months, as an excess supply of pork and eggs kept food prices subdued. However, Wen said policies to boost domestic demand and stimulate consumption will rebalance market supply and demand, leading to a modest full-year CPI increase of around 0.1% year-on-year (Source: Securities Daily).

Yuan-denominated loans increased by CNY1.29 trillion in September, driven by a new CNY500 billion policy-based financial tool, improved corporate business sentiment, resilient exports, the gradual implementation of fiscal interest subsidy and property stabilisation measures, and persistently low lending rates, a chief economist told Securities Daily. In September, the weighted average interest rate for newly issued corporate and personal housing loans (in both domestic and foreign currencies) both stood at about 3.1%, roughly 40 and 25 basis points lower than a year earlier. Analysts noted the M1–M2 spread has narrowed markedly since January, signalling stronger business activity and a recovery in household investment and consumption demand.

China’s State Administration of Foreign Exchange (SAFE) will further advance the high-level opening of the FX market, ensure its stable operation and continue to expand its breadth to enhance the quality and efficiency of financial services for the real economy, the head of the Balance of Payments Department said in an interview posted on the administration’s official WeChat account. Looking ahead, the equilibrium of the balance of payments will stay stable, while the Yuan exchange rate mechanism will keep improving and macroprudential management of the FX market will become more effective, making China better positioned to address external risks and challenges, the official said. (Source: SAFE WeChat Account)