MNI China Daily Summary: Tuesday, May 27

POLICY: China saw profits of large-scale industrial enterprises increase by 1.4% y/y from January to April, an acceleration of 0.6 percentage points compared to Q1, the National Bureau of Statistics announced.

LIQUIDITY: The PBOC conducted CNY448 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY91 billion after offsetting the maturities of CNY357 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6186% from the previous 1.6545%, Wind Information showed. The overnight repo average decreased to 1.4482% from 1.5113%.

YUAN: The currency weakened to 7.1949 against the dollar from the previous 7.1843. The PBOC set the dollar-yuan central parity rate higher at 7.1876, compared with 7.1833 set on Monday. The fixing was estimated at 7.1869 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.6450%, unchanged from previous close, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index was down 0.18% to 3,340.69, while the CSI300 index fell 0.54% to 3,839.40. The Hang Seng Index increased 0.43% at 23,381.99.

FROM THE PRESS: The People’s Bank of China has taken a moderating approach to the yuan’s appreciation momentum rather than actively pushing for substantial gains, Yicai.com reported, citing market insiders' analysis. The yuan could fluctuate between 7.2-7.3 against the U.S. dollar in the next six-12 months, depending on export performance and trading firms’ forex settlement, the newspaper said, citing Zhu Haibin, chief China economist at JP Morgan.

China's Ministry of Finance said Moody's decision to maintain the country's rating and outlook unchanged reflected China's positive economic prospects, Shanghai Securities News reported. New and existing policies will combine to support the nation’s high-quality economic development, following a strong start to the year, a statement on the ministry's website noted.

Authorities should boost consumption by prioritising resident’s capital market income given the limited potential for increasing real estate and wealth management product wealth, according to Lian Ping, chief economist at Guangkai Industry Research Institute. In the current macroeconomic environment, wage growth and business income are unlikely to provide significant short- to medium-term support for consumption, Lian said, noting improvements to pensions and social security have only a stabilising effect.