China’s Market News: Lower Profits, Improved Prices

This daily digest focuses on market sentiment, new developments in China’s foreign exchange policy, changes in financial market regulations and Chinese-language economic coverage in order to keep DailyFX readers up-to-date on news typically covered only in Chinese-language sources.

- SOEs’ profits dropped -13.8% in the first quarter on an annualized basis.

- NDRC increased the domestic oil price for the first time in 12 weeks.

- PBOC added 267.0 billion yuan on April 25; the total liquidity injected in April hit 715.0 billion yuan.

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Hexun News: Chinese leading online media of financial news.

- Profits of state-owned enterprises (SOEs) in the first quarter of 2016 dropped -13.8%, to 432.3 billion yuan from a year ago according to a report released by the Ministry of Finance. Specifically, profits of SOEs controlled by the central government declined by -13.2% to 339.9 billion yuan; profits of SOEs controlled by local governments dropped by -15.5% to 92.4 billion yuan. In terms of industries, pharmaceutical, IT and tobacco companies had the highest increases in earnings. Oil, coal, steel and non-ferrous metal industries on the other hand, showed the largest losses.

- The National Development and Reform Commission (NDRC) raised domestic oil prices on April 27th (local time) for the first time since January 13th. The gasoline price was increased by 165 yuan/ton and the diesel price increased by 160 yuan/ton. Despite the fact that the Doha Talks failed to reach a production cap deal, international oil prices have continued to see improvements while testing key support levels. Coupled with better-than-expected Q1 Chinese data, NDRC decided to increase domestic oil prices.

Sina News: China’s most important online media source, similar to CNN in the US. They also own a

Chinese version of Twitter, called Weibo, with around 200 million active usersmonthly.

- China’s Central Bank injected 267. 0 billion yuan on April 25 through the Medium-term Lending Facility (MLF) deals with 18 financial institutions. 101.0 billion yuan of the MLFs will mature in 3 months with an interest rate of 2.75%. The rest will mature in 6 months with an interest rate of 2.85%. As of today, the Central Bank has added 715.0 billion yuan through MLFs in April. The total amount of MLFs to be matured this month is 551.0 billion yuan.

- China has approved IMF and Asian Development Bank to become members of China’s interbank market as of April 25th. They are now allowed to trade spot, forwards, swaps and options products in the Chinese domestic market. This is another step that China has made to open up its domestic market to foreign financial institutions.

- The condition of credit issuance in April has changed after the loans issued in the first quarter hit 4.61 trillion yuan. The increasing credit risk has led to tightened controls on issuing new consumer loans, mortgage loans and loans to small enterprises, according to Chinese banks. Specifically, private mortgage loans took up a major part of the new loans issued in the first quarter. However, as home purchase restrictions have been introduced in the Tier One and some of the Tier Two cities (large cities), it is expected that mortgage loans will decrease significantly in April.

Written by Renee Mu, DailyFX Research Team

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