Next Week in China: 24-28 March 2025

00:00

Major Data Releases:

25 March: Hong Kong to report February external merchandise trade data
25 March: China to report March operations of medium-term lending facility (MLF)
25 March: China to report March MLF interest rate
26 March: Macau to report February external merchandise trade data
27 March: China to report February industrial profits
28 March: Hong Kong to report December 2024 wage and payroll statistics

Next week will be a relatively quiet period for major data releases, with only six scheduled for Chinese markets and only two for Mainland China.

For the MLF, we expect the rate to remain unchanged by 25 March given that both the loan prime rate (LPR) and the MLF rate were left steady earlier this month. During the week of 10-14 March, reverse repos totalling RMB 777.9 billion (USD 107.3 billion) matured while the central bank injected RMB 526.2 billion (USD 72.6 billion) through fresh reverse repos, resulting in a net withdrawal of RMB 251.7 billion (USD 34.7 billion). This marks the second consecutive week of net fund withdrawal by the central bank. On 15 March, RMB 387 billion (USD 53.4 billion) of one-year MLF matured, which the central bank replaced with RMB 481 billion (USD 66.4 billion) through seven-day reverse repos to augment money supply. Since the amount of MLF maturing is relatively smaller than past amounts, we expect that before the central bank renews the MLF in late March, maturing repos will have a minimal impact on market liquidity. Since this month, the seven-day repo rate for banks has remained around 1.8 per cent.

China’s interbank lending market has been generally stable as banks appear to have ease of access to cash. However, it remains unclear whether the central bank’s stance will continue to change and whether monetary easing through reserve requirement ratio cuts and interest rate reductions will be implemented in the short term. Considering recent policy statements and economic fundamentals, reserve requirement ratio cuts might come sooner than interest rate cuts, but this will still have to wait. The second quarter could be the window for this.

Chinese stocks generally declined over the past week. As of Thursday, 20 March, the MSCI China Index was the lone gainer among major indices as it increased by 0.66 per cent from last week’s close. Meanwhile, the Shanghai Composite Index decreased by 0.31 per cent, the Shenzhen Component Index fell by 0.90 per cent, and the ChiNext Index slid the most by 1.20 per cent. As seen in the previous week, small to mid-cap stocks slightly outperformed large-cap stocks. From a style perspective, value stocks slightly outperformed growth stocks. February data on social financing, inflation, and trade have all declined compared to previous months, disappointing market expectations. However, on 6 March, the National Development and Reform Commission said multiple departments have jointly formulated a “Special Action Plan” to boost consumption and drive faster GDP growth. Thus, market expectations for the implementation of “Two Sessions” policies to stimulate the domestic economy have risen again.

This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.