MNI China Daily Summary: Wednesday, September 3

EXCLUSIVE: The Hong Kong dollar is likely to remain supported by Chinese mainland firms listing in the city and overseas capital inflows following potential U.S. Federal Reserve rate cuts, forex experts told MNI, though they noted it is unlikely to repeat the sharp rally against the greenback seen in early May as mainland inflows into equities slow.

LIQUIDITY: The PBOC conducted CNY229.1 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY150.8 billion after offsetting maturities of CNY379.9 billion today, according to Wind Information

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4415% from 1.4375%, Wind Information showed. The overnight repo average decreased to 1.3140% from 1.3141%.

YUAN: The currency strengthened to 7.1468 to the dollar from 7.1476 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 7.1108, compared with 7.1089 set on Tuesday. The fixing was estimated at 7.1494 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8050%, down from Tuesday's close of 1.8170%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 1.16% to 3,813.56, while the CSI300 index fell 0.68% to 4,459.83. The Hang Seng Index declined 0.60% at 25,343.43.

FROM THE PRESS: The net inflow of southbound funds, an important driver for the Hong Kong stock market rebound, has exceeded the HKD1 trillion-mark to set a historical high as of Sept 2 this year, Shanghai Securities News reported. This not only injected abundant liquidity into the market, but also changed the investment structure and pricing logic, the newspaper said. The proportion of daily trading volume of southbound funds in Hong Kong stocks has increased to about 35% from about 5% in the early days of the launch of the Stock Connect, the newspaper said citing data by Xiangcai Securities.

China has transferred part of its state-owned capital to replenish the social security fund, and introduced tax exemption to support the transfer, Yicai.com reported. To avoid additional tax burden during the transfer process, the transferred state-owned equity and cash income will be exempted from value-added tax, corporate income tax and stamp duty, and the implementation date is retroactive to Apr 1, 2024 with taxes paid before to be refunded, according to a document by the Ministry of Finance Tuesday.

China's logistics prosperity index was 50.9% in August, up 0.4 percentage points from July, Securities Daily reported citing data by China Federation of Logistics & Purchasing. Total logistics business volume and new orders have grown rapidly, with the gradual implementation of policies to promote consumption, stabilise investment, and improve social wealth, the newspaper said citing Liu Yuhang, director of China Logistics Information Center. Companies’ expectations remain positive with the business activity expectation sub-index staying in the high prosperity range of above 55%, said Liu.