Last week, PBC injected RMB50bn of reverse repos against RMB50bn of expiring reverse repos; and RMB100bn of MLF against RMB400bn expiries. Meanwhile, eight companies debuted A-share IPOs. Industry capital net shrank by RMB8.87bn with a small net northbound inflow. The week’s balance of margin financing and securities lending came to RMB1.8tr. 

Our takeaways

Last week (12-18 July), after the People’s Bank of China’s (PBC) RRR cut, the central bank injected RMB50bn of reverse repos against RMB50bn of expiring reverse repos, and it injected RMB100bn of MLF against RMB400bn expiries, with no TMLF operations or expirations. In the previous week, PBC had injected RMB50bn of reverse repos against RM110bn of maturing reverse repos; there were no MLF/TMLF operations or expirations. Last week, SHIBOR (3 months) closed at 2.404%, down 3.10bp from the previous week. Interbank lending closed at 2.15%/2.40% last week (1 day/7 days), changing -10/+3bp from the previous week. Inter-bank pledged repurchase rates (1 day/7 days) closed at 2.12%/2.21%, changing -12/-3bp from 9 July. Maturity yields of AAA+ interbank certificates of deposit closed at 2.12%/2.24%/2.50% last week (1 month/3 months/6 months), changing by -6/-9/-6bp wow. Last week, maturity yields of 3A corporate bonds (1 year/5 years/7 years) were 3.14/3.40/ 3.65%, changing -8.58/-13.10/-17.67bp from 9 July. Last week, yields on maturity of treasury bonds (3 years/5 years/10 years) closed at 2.27/2.79/2.97%, changing -3.46/-9.23/-2.78bp from 9 July. Last week, maturity yields of short-term bills (1 year/3 years/5 years) closed at 2.78/ 3.15/3.40%, changing -9.41/-7.56/-14.17bp from 9 July. 

8 companies listed A-share IPOs with a dip in new funds  

Last week, 8 companies listed A-share IPOs over 12-18 July: mainboard 1, GEM 3 and STAR Market 4, bringing total funds raised to RMB3.59bn. This compares with the previous week when 14 A-share companies listed on the IPO market, raising RMB7.85bn. Based on the date of establishment, 12 common stocks + partial stock/balanced hybrids + flexible allocation funds were issued during the period to a total of 15.69bn shares; in the previous week, 12.68bn shares were issued. 

Industry capital net reduced by RMB8.87bn with a small net northbound inflow  

Last week, industry capital increased by RMB1.3bn and reduced by RMB10.17bn to a net reduction of RMB8.87bn. In the previous week, industry capital increased by RMB392m and reduced by RMB12.94bn to a net reduction of RMB12.55bn. Last week, total inflow of funds from the north was RMB1.67bn, with an RMB244m outflow from Shanghai Stock Exchange and an RMB1.913bn inflow from Shenzhen Stock Exchange. Southbound capital inflow amounted to RMB1.08bn, of which RMB2.99bn inflow was from Shanghai and RMB1.91bn outflow from Shenzhen. In the previous week, total inflow of northbound capital was RMB8.32bn, of which RMB2.99bn was from Shanghai Stock Exchange and RMB5.332bn from Shenzhen Stock Exchange. Total outflow of southbound funds was RMB11.08bn, of which RMB4.76bn was from Shanghai Stock Exchange and RMB6.32 from Shenzhen Stock Exchange.  

Market activity: As of 16 July, the balance of margin financing and securities lending was RMB1.8tr, accounting for 2.61% of the circulating market value of A-shares. As of 9 July, the balance of margin financing and securities lending was RMB1.79tr, accounting for 2.61% of circulating market value of A-shares. Last week, total turnover in the A-share market arrived at RMB6.06tr, with a daily average of RMB1.2tr. As of 16 July, financing purchases accounted for 9.2%; previous week’s total turnover in the A-share market was RMB5.45tr, with a daily average of RMB1.09bn; as of 9 July, financing purchases accounted for 8.9%. 

Here are other indicators we focus on: as of 18 July, the scale of equity financing was RMB70.92tr, of which RMB12.88bn was issued initially and RMB28.93bn added subsequently. In June, the scale of equity financing was RMB132.85bn, of which RMB56.15bn was issued initially and RMB50.89bn added later. In June, three M&A and reorganization plans were listed; two passed, resulting in a passing rate of 66.7%. Last month, four M&A and reorganization plans were listed; all passed, a pass rate of 100%.  

Risks include: tightening monetary policy; macroeconomic downside risks; and a surge in overseas market uncertainties. 

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