Southeast Asia’s IPO Market Fell Drastically In The First Half, But AI Listings Could Revive It

Economic

Summary:

The number of listings slid 21.2% year on year to 67, while the amount raised from these IPOs dropping 53.3% year on year to $1.4 billion, a Deloitte report showed.

Southeast Asia’s IPO market declined significantly in the first six months of 2024, with market capitalization plunging 71% to $5.8 billion, a report from Deloitte showed.

The region saw only 67 initial public offerings in the first half, with that number falling by 21.2% compared to the same period a year ago. The amount raised from these IPOs dropped 53.3% year on year to $1.4 billion.

There were no blockbuster IPOs from January to June, with only one large IPO with market capitalization of more than $1 billion and raising more than $200 million, Deloitte said. In the same period a year ago, there were three large IPOs which raised more than $600 million each.

This marks a continued downward trend that began in the second half of 2022, according to Deloitte data.

The downward trend signals “subdued IPO market sentiments where investors and IPO candidates continue to navigate macroeconomic factors,” Deloitte said.

Still, the report pointed out that historically, the latter half of the year “has always been the better performing half between 2020 to 2022.”

“Despite a positive growth outlook and increasing foreign direct investment in Southeast Asia, the prolonged geopolitical instability and high interest rates environment have been the significant factors affecting the market conditions and investor sentiments in Southeast Asia,” said Tay Hwee Ling, Deloitte’s Southeast Asia accounting and reporting assurance leader.

High interest rates may persist in 2024 as governments address inflation concerns, Deloitte analysts warned.

Against this backdrop, investors geared toward “proven profitability and sustainable cash flows” instead of the growth-at-all-cost business model that many companies adopted from 2020 to 2022.

IPO fundraising in Indonesia plunges

Indonesia, in particular, saw the most pronounced drop among all the Southeast Asian countries.

“Indonesia, which topped the 2023 [Southeast Asia] IPO charts, experienced a significant decline in the first half of 2024, as investors and IPO aspirants adopted a wait-and-see approach in light of the presidential elections in February 2024 and in anticipation of new economic policies,” Deloitte’s analysts said.

Market capitalization of Indonesian listings plunged 92.2% to $1.22 billion from January to June while IPO proceeds raised fell 89.1% to $248 million compared to a year ago. The number of Indonesian listings in the first six months of this year fell to 25 from 44 in the same period last year — down 43.2%.

“While Southeast Asia’s IPO market may appear subdued in 2024, there is cautious optimism that conditions will improve beyond 2024,” said Tay.

Tay said there is anticipation of lower interest rates ahead which could encourage the return of REIT [real estate investment trusts] listings, while artificial intelligence-related IPOs could hit the market in the near future as many AI companies are still in the early stages.

“We anticipate a significant wave of AI IPOs tapping on the IPO capital markets in the coming years, bringing innovation and new opportunities to the market,” Tay said.

Source:CNBC

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Economic

Stocks

The S&P 500 and the Nasdaq ended last week at fresh record highs following cooler labour market data which heightened expectations that the Fed will deliver its first rate cut in September. For the week, the Nasdaq gained 3.60%, the S&P 500 added 1.95%, and the Dow Jones added 257 points (+0.66%).

Labour market data insights

Friday's non-farm payrolls data showed the economy added 206,000 jobs in June, in line with expectations. However, April and May's numbers were revised lower by a combined 111,000 jobs. Providing further evidence of cooling, the unemployment rate increased to 4.1% from 4% despite an increase in the participation rate to 62.6% from 62.5%. Lastly, average hourly earnings increased by 3.9% year-on-year (YoY) in June, the lowest since June 2021.

Key events this week

This week, the key events on the US economic calendar are the consumer price index (CPI) and producer price index (PPI) data for June, Fed Chair Powell's semi-annual testimony on monetary policy to the Senate Banking Committee and the start of the US Q2 2024 earnings season. The US rates market starts this week pricing in 19 basis points (bp) of Fed rate cuts in September, with a total of 53 bp of Fed rate cuts priced before year-end.

What is expected from US CPI

In May, the annual rate of inflation in the US unexpectedly slowed to 3.3% YoY from 3.4% in April, below forecasts of 3.4%. The annual core inflation rate eased to 3.4% YoY in May from 3.6% in April, for its lowest reading in three years.

The cooler CPI readings were followed in the same session by a more hawkish than expected Federal Open Market Committee (FOMC) meeting as the Fed's Summary of Economic Projections (SEP) dots showed just one 25 bp cut is expected in 2024 vs. the three rate cuts forecast in March.

Fed's stance and upcoming data

Fed Chair Powell, speaking at the Sintra Forum in Portugal last week, sounded dovish and described "real progress on inflation." This, along with softer growth and labour market data last week, has increased confidence that the Fed will start cutting rates in September.

Further confidence will be gained if this week's CPI data is in line with or below market expectations. The preliminary expectation is for headline inflation to fall to 3.1% YoY from 3.3% prior. Core inflation is also expected to remain stable at 3.4% YoY. S&P 500 And Nasdaq Hit Record Highs; Fed Rate Cut Expected In September_1

S&P 500 And Nasdaq Hit Record Highs; Fed Rate Cut Expected In September_1

S&P 500 technical analysis

The S&P 500 was in unstoppable form from the middle of last week, as it surged above weekly trend channel resistance at about 5500 to finish at record highs – once again wiping away potential signs of loss of upside momentum.

Providing the S&P 500 remains above support at 5500, there is scope for the rally to extend towards 5750. While we aren't inclined to chase it higher here, we wouldn't be fighting the move higher.

S&P 500 And Nasdaq Hit Record Highs; Fed Rate Cut Expected In September_2

Nasdaq 100 technical analysis

Last week, the Nasdaq 100 surged above recent highs and weekly trend channel resistance at around 20,050. As can be viewed on the monthly chart below, the magnitude of the rally from the October 2023 low makes the bear market of 2022 seem a lot less significant than it was.

While we wouldn't be chasing the Nasdaq at these levels, given the parabolic nature of the rally, a move towards 22,000 doesn't seem unrealistic in the months ahead. S&P 500 And Nasdaq Hit Record Highs; Fed Rate Cut Expected In September_3

S&P 500 And Nasdaq Hit Record Highs; Fed Rate Cut Expected In September_3

A daily close below support at 20,050/20,000, as seen on the daily chart below, would be an indication that the uptrend may have run its course and that a corrective pullback is underway. S&P 500 And Nasdaq Hit Record Highs; Fed Rate Cut Expected In September_4

S&P 500 And Nasdaq Hit Record Highs; Fed Rate Cut Expected In September_4

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ING

Economic

Forex

USD: Inflation and Powell in focus this week

The dollar is modestly stronger out of the weekend as a surprise win of the left-wing alliance in the French second-round legislative elections sent European currencies lower and fuelled some safe-haven demand, with the Japanese yen and Swiss franc rising. We discuss the French vote in detail in the EUR section below.

This week will be a hot one for US macro, with the CPI report for June out on Thursday. We expect the core print at 0.2% month-on-month, in line with consensus, which should be enough to keep markets betting on a September rate cut, which is now 83% (19bp) priced in.

We are also seeing the pricing for total easing in 2024 starting to inch above 50bp again after Friday's jobs report saw a slightly above-consensus payroll print (206k), but -111k of net revisions for the two previous months and unemployment rising from 4.0% to 4.1%. As discussed here, about three-fourths of hiring was in health care and government, and private payrolls undershot expectations. There is a clear weakening trend emerging in the US jobs market and that will, in our view, push an FOMC that wants to avoid unnecessary economic pain to cut three times this year, starting in September.

This week also sees Federal Reserve Chair Powell's testimony to Congress (Tuesday-Wednesday). We stick to our view that if any surprising message emerges from Powell's communication, it will be on the dovish side after an excessively hawkish revision in the June Dot Plot projections.

All in all, we expect the macro story to keep pointing to a dollar decline, but political developments in the eurozone and the US mean that only a few currencies can benefit from it, and that may not include the euro. By extension, the downside risks for the euro-heavy DXY index may be relatively limited. Today's US data calendar is rather quiet, and there are no scheduled FOMC speakers.

EUR: Markets still assessing French election result

The second round of parliamentary elections delivered a surprise result. While it was widely projected that Marine Le Pen's Rassemblement National (RN) would fall short of a majority, the left-wing alliance Nouveau Front Populaire (NFP) unexpectedly won more seats (182) than any other party. President Emmanuel Macron's centrist group came in second with 163 seats and the RN alliance secured 143. This means a hung parliament and two main scenarios: difficult coalition talks or a technocratic government.

The positive market reaction after the first round, which had seen an RN victory, gave an indication that investors were more comfortable with the far right than with the far left, which is perceived as a greater danger to the already fragile French fiscal position. One of the leaders of the NFP, Jean-Luc Melenchon said the NFP plans to strictly implement its programme, which includes an increase in public spending to support social measures including higher minimum wages and an unwinding of Macron's reform that increased the retirement age.

Those fiscal concerns are probably behind the euro trading around 0.2% below its Friday close at 1.0820 after having tested 1.0800 last night. We are waiting for the bond markets to open and will closely monitor OAT-Bund 10-year spread – now at 65bp. Our rates team still sees some rewidening risks as a hung parliament will struggle to deliver any fiscal consolidation and there are some risks related to a potential left-wing government. But the 80bp area could be the limit given the centrist group came in second, offering some balance and potentially thwarting spending plans. Quite intuitively, markets will favour a technocratic government as opposed to an NFP-led coalition.

From an FX perspective, there are lingering risks for the euro moving on, and we continue to see the common currency as a likely laggard in the G10 space in an environment that can still support pro-cyclical currencies on the back of softening US data.

The absence of market-moving data releases in the eurozone this week and the European Central Bank about to enter the quiet period ahead of its 18 July meeting will contribute to making the coming days all about French political developments. We think EUR/USD can trade below 1.08 on the back of that before US macro developments take over.

GBP: BoE speakers are back

Markets are monitoring the first week of Keir Starmer as UK Prime Minister following an uneventful election day for sterling and gilts. Our UK economist James Smith takes a deep dive into British fiscal issues and what the new government can do to avert a cut in spending without higher taxes via tweaks to the fiscal rules.

We doubt that fiscal prospects will have an impact on the pound just yet, while developments in French politics, US macro and Bank of England rate expectations will remain the largest GBP drivers. BoE officials are due to start speaking publicly again following a quiet period before the election, with hawkish external member Jonathan Haskel delivering remarks today, and Huw Pill and Catherine Mann (another hawk) speaking on Wednesday.

The UK data calendar includes May GDP (Thursday) but is relatively quiet before next week's June inflation report. We see some downside risks for GBP/USD this week given the spillover from EU political risk, which however means that a return in EUR/GBP steadily above 0.8500 has been delayed further.

CEE: Inflation numbers should please central bankers

We will see most of this week's events in the region in the first half. The Czech market is back after Friday's holiday. So with a delay, we will see Czech National Bank minutes from the June meeting when the central bank cut rates by 50bp to 4.75%. The minutes will show the names of the two members voting for the 25bp step and a discussion of the next rate cut. On the economic front, we'll see industrial production data in the Czech Republic and final GDP data in Romania was released this morning. Inflation for July will be released tomorrow in Hungary. We expect the headline rate to fall from 4.0% to 3.7% year-on-year, below market expectations. However, core inflation remains higher at 4.0%. We will also see inflation in the Czech Republic on Wednesday. Here, we expect a decline from 2.6% to 2.5% YoY, slightly above the market expectation, and a further decline in core inflation. On Friday, industrial production and labour market data will be released.

Conditions for CEE FX have generally improved in recent days and we could see some further gains across the board. EUR/USD is around the highest level since mid-June and so far this has been ignored by CEE FX, especially in EUR/CZK. At the same time, core rates have rallied more than CEE rates and the rate differential has risen especially in Poland's zloty. And generally, the market remains in risk-on mode after the US jobs data. On the other hand, inflation numbers in the Czech Republic and Hungary are more on the dovish side for central banks and could be negative for FX. So the picture is quite mixed but unless we see more significant surprises we should still be stronger in CEE FX at the end of the week.

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Alex

Economic

Commodity

Crude oil prices rose more than 6 percent in June after OPEC plus extended its production cut and on hopes of increased summer fuel demand in the US. Furthermore, the threat of a wider Middle East conflict and dangers from intensifying hurricanes lifted the positive momentum. However, the latest energy agency report suggests world oil demand is expected to slow down in the coming years.

The US WTI and the Asian Brent contract saw significant gains during the period. The US WTI recovered its early losses and settled above $82-barrel last week. Similarly, Asian Brent oil regained momentum from a low of $77 per barrel to $87 followed by the OPEC decision. Domestic MCX futures also mirrored the trend.

The OPEC plus cartel, which includes Russia, agreed to extend most of its deep oil production cuts into 2025 in the latest meeting held in early June. They also announced that the production cuts would be extended by another 2.2 million bpd by the end of September 2024. This decision was to shore up the market amid tepid demand growth, high interest rates, and rising US output. The combined output cut of the cartel is currently a total of 5.86 million barrels per day, which comes to about 5.7 percent of global demand.

Nowadays, the Asian oil demand is one of the key drivers of global oil prices. As per the agencies like OPEC and IEA, China’s oil demand will grow in 2024 when compared to the previous year. However, China’s oil imports in the first half of this year have declined and if there is a somewhat brighter light in Asia, it’s India. Indian crude imports in the first half of 2024 are up about 90,000 bpd compared to the same period last year.

The ongoing Israel-Hamas war has led to increased instability and conflict in the region and poses risks to the oil markets. Worries over potential supply shortages are affecting market sentiments. Earlier, attempts taken by various countries to cool down the tensions have put downward pressure on global oil prices.

The solid summer transport demand and uncertainty over the impact of hurricanes on oil production and consumption in the US also led to a positive price outlook. There is a conviction that the US stocks will be drawn in the coming months due to seasonal demand. The hurricane season in the Atlantic started with Hurricane Beryl last week.

However, the latest US IEA report predicts a slower oil demand in the coming years due to energy transition advances. Global oil production is believed to ramp up in the next few years amid easing market strains and pushing spare capacity by major market players. The agency also foresees a well-supplied oil market till 2030 as well.

The agency predicts global oil markets will show a major surplus this decade due to slowing demand growth and surging supplies. Strong demand from fast-growing economies like Asia is set to drive oil use higher but those gains will increasingly be offset by rising EV sales, energy-efficient conventional vehicles, and structural economic shifts.

The ongoing supply-demand dynamics are not promising for the prices. The seasonal demand from the US and the extension of OPEC plus production cut may bring some positive momentum, but it is unlikely to continue as supplies might beat demand in the long run. Nevertheless, traders should cautiously track the ongoing geopolitical crisis, global growth outlook, the performance of the US dollar, and the Fed’s rate cut decisions to set a firm direction on the commodity.

Source:Economic Times

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Samantha Luan

Economic

Despite the earlier predictions of many, and to the dismay of borrowers, the end of the rate rise cycle has not yet arrived.

In early August, the Reserve Bank will once again weigh up persistent inflationary pressure and in doing so, it must also assess the high cost of housing.

This means giving due consideration as to why that cost is so high and what further rate rises will do to this cost in the future.

The latest CoreLogic Home Value Index shows the median dwelling price in Sydney reached another new record of over $1,156,020 in June, growing a further 0.5 per cent during the month, to be up 6.3 per cent for the just-completed financial year.

Obviously, high house prices and rents contribute significantly to inflation but these are not discretionary costs and therefore should not be viewed in the same way as other items in the RBA’s inflation basket.

The potential for a rate rise typically dampens activity in the real estate market. Yet, the main indicators remain fairly positive. Auction clearance rates remain strong and volumes are solid, with transactions continuing to occur at a steady rate, as evidenced in stamp duty revenue.

When the final numbers are in, the NSW Government will have pocketed more than $1 billion extra from property buyers in stamp duty in FY2024 than it did in FY2023. It’s another reminder of the huge contribution property consumers make to the economy and just how much Government relies on the industry to keep the state afloat.

This overdependence on property is about to intensify following the Government’s Budget announcement that singles out property owners for more pain through land tax reforms.

It’s unreasonable and short-sighted.

Removing land tax indexation means more and more properties will be captured as values inevitably rise. Government’s plan amounts to letting the increase in property values do the work of increasing taxes and will exacerbate the housing crisis. It increases costs for owners, mortgage holders and renters.

As investors know, the cost of holding a residential property is high. More tax will place more pressure on returns, leaving landlords two bad options: pass the extra cost onto tenants or sell their investment property, taking more homes out of the undersupplied rental market.

Strata management crackdown

Together with the coming strata reforms aimed at cracking down on rogue strata managers, signalled by the Minister for Better Regulation and Fair Trading last month, the landscape is changing for investors.

It’s important for people to feel confident investing in strata schemes and it’s worth noting the vast majority of strata managers add significant value to Owners Corporations in what can be a dynamic and challenging regulatory environment.

It’s also important for people to feel confident investing in residential property as an asset class, and this is where bad regulations like tax disincentives are having a counterproductive impact.

A residential property can be a sound investment from a capital growth perspective but the cost burdens faced by property investors are incomparable to those who choose other investment assets.

The opportunity for proper reform still exists and is becoming ever more urgent.

Source:apimagazine

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Samantha Luan

Economic

Forex

Central Bank

Euro dips mildly a in Asian session after French parliamentary elections on Sunday delivered unexpected results. The markets had anticipated a challenging outcome for centrist President Emmanuel Macron, including a hung parliament. Yet, the outcome was particularly surprising for Marine Le Pen's National Rally. Despite being a frontrunner, her party only secured the third spot. The leftist New Popular Front alliance claimed the top position with over 180 seats. However, no party achieved the absolute majority of 289 seats required to govern alone.

For investors, the fact that a far-right government did not emerge in France is a relief. However, the resulting hung parliament means political gridlock is likely to continue. Macron's strategy of calling snap elections, following the European parliamentary results, did not deliver the desired outcome. His party remains in a precarious position, lacking the necessary support to advance significant legislative proposals, which adds to the political uncertainty in France.

As the political scene in France unfolds, market's attention will shift to the US this week. Fed Chair Jerome Powell's testimony is eagerly awaited, particularly for insights into Fed's readiness for monetary easing. Additionally, US CPI report due on Thursday is crucial. RBNZ rate decision is another highlight of the week while UK will also publish GDP data.

Technically, while EUR/CHF gaps lower as the week starts, selling momentum is limited so far. As long as 0.9639 minor support holds, rise from 0.9476 is still in favor to extend through 0.9754 at a later stage. However, firm break of 0.9639 will argue that the rebound is over, and bring retest of 0.9476 low. Euro Edges Down Following Left-Wing Triumph in French Elections_1

Euro Edges Down Following Left-Wing Triumph in French Elections_1

In Asia, at the time of writing, Nikkei is up 0.16%. Hong Kong HSI is down -1.34%. China Shanghai SSE is down -0.53%. Singapore Strait Times is down -0.22%. Japan 10-year JGB yield is up 0.0163 at 1.086.

Japan's nominal wages rises 1.9% yoy, highest in 11months

Japan's nominal labor cash earnings increased by 1.9% yoy in May, up from April's 1.6% growth. Despite this being the 29th consecutive month of growth and the most substantial increase in 11 months, it fell short of the expected 2.1% yoy.

Regular pay saw a notable rise of 2.5% yoy, marking the best pace since January 1993, while overtime pay rebounded by 2.3% yoy, its first increase in six months.

However, these gains in nominal wages are overshadowed by the continued decline in real wages, which fell by -1.4% yoy, marking the 26th consecutive month of decline. This is also a deterioration from the -1.2% yoy drop recorded in April.

Fed Powell's testimony, US CPI, RBNZ Rate Hold, and UK GDP

This week's economic calendar, while not overloaded with events, includes several critical occurrences that could significantly influence financial markets across the spectrum, from stocks and bonds to currencies. Among these, the testimony of Fed Chair Jerome Powell and US CPI report are particularly noteworthy.

Powell's recent comments have indicated that inflation is back on a downward path. However, he emphasized the need for more consistent progress before Fed considers lowering interest rates. This stance will be under intense scrutiny, especially following last week's weak economic data, which pointed to notable cooling of the US economy. Investors are particularly interested in whether Powell believes Fed is ready to start lowering interest rates by September.

The June CPI data, set for release on Thursday, will further clarify the inflation outlook. Expectations are for the headline CPI to decrease from 3.3% to 3.1%, while core CPI is predicted to remain steady at 3.4%. Any upside surprises could prompt Fed officials to maintain their current cautious stance on policy easing. Additionally, PPI and the University of Michigan Consumer Sentiment Index will be key indicators to watch.

Also on the central bank front, RBNZ will announce its rate decision on Wednesday. The market widely expects the OCR to remain at 5.50%. Despite deepening economic slowdown in New Zealand, RBNZ is unlikely to adjust rates yet, as inflation remains high at 4% in Q1. The central bank's forecasts do not predict a reduction in the OCR until Q3 2025. There is prospect of RBNZ signaling an early cut, but only after next week's Q2 CPI release, not at this meeting.

In the UK, GDP data will be a highlight this week, especially following Labour's landslide victory in last week's general election. With the political scene now settled, BoE) is poised to deliver its first rate cut of the cycle next month. Markets are currently pricing in more than a 60% chance that BoE will move at its next meeting on August 1. The decision on whether there will be one or more rate cuts this year will hinge on the evolving economic conditions and inflation trends.

Here are some highlights for the week:

Monday:Germany trade balance; Eurozone Sentix Investor confidence.
Tuesday:Australia Westpac consumer sentiment, NAB business confidence; Japan machine tool orders.
Wednesday: Japan PPI; China CPI, PPI; RBNZ rate decision; Italy industrial production.
Thursday:Japan machine orders; Germany CPI final; UK GDP, production, trade balance; US CPI, jobless claims.
Friday: New Zealand BNZ manufacturing; China trade balance; Canada building permits; US PPI, U of Michigan consumer sentiment.

EUR/JPY Daily Outlook

EUR/JPY dips mildly today but stays above 173.07 minor support. Intraday bias remains neutral for the moment. More sideway trading could be seen first. On the upside, firm break of 174.50 will resume the larger up trend and target 138.2% projection of 164.01 to 170.87 from 167.52 at 177.00. On the downside, however, break of 173.07 will turn bias to the downside for deeper pullback. Euro Edges Down Following Left-Wing Triumph in French Elections_2

Euro Edges Down Following Left-Wing Triumph in French Elections_2

In the bigger picture, long term up trend is still in progress. Next target is 100% projection of 139.05 to 164.29 from 153.15 at 178.38. For now outlook will stay bullish as long as 170.7 resistance turned support holds, even in case of deep pullback.

Source: ActionForex

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Cohen

Economic

Bond

Central Bank

China’s central bank said on Monday it would start conducting temporary bond repurchase agreements or reverse repos to make open market operations more efficient and keep banking system liquidity ample.

Market participants and analysts believe the move paves the way for a new interest rate corridor, with the seven-day reverse repo rate serving as a central guide, giving the bank more leeway to manage cash conditions and interest rates amid hot demand for bonds.

That also comes after the central bank’s governor said the seven-day rate “basically fulfils the function” as the main policy rate.

The temporary repos and reverse repos will be loans with overnight tenors and will be conducted depending on market conditions.

The interest rates of the temporary and reverse repos will be 20 basis points below and 50 basis points above the seven-day reverse repurchase operations, or 1.6% and 2.3%, respectively.

“From now on, the People’s Bank of China (PBOC) will conduct temporary repos or temporary reverse repo operations depending on conditions,” the central bank said in an online statement.

Reverse repo operations should allow the central bank to inject cash into the banking system, whereas the repos could withdraw funds.

“If OMO repos were to be conducted, then the OMO repo rate could serve as the floor as this would be the rate the PBOC pays to absorb excess liquidity from the market,” said Frances Cheung, rates strategist at OCBC Bank.

“Being conducted regularly, daily OMOs can be effective in guiding market interest rates within a range,” she said.

PBOC Governor Pan Gongsheng said last month the seven-day reverse repo rate fulfilled the function as the main policy rate, noting the cost of monetary policy instruments with other tenors diminished their roles as policy rates.

“For market participants, this temporary repo or reverse repo rate is punitive in nature, and it is not ruled out that it will become a formal policy tool in the future,” said Xing Zhaopeng, senior China strategist at ANZ.

Xing expects 1.6% to 2.3% could become the range of future interest rate corridor.

“The central bank’s move has added an intraday liquidity management tool, which helps stabilise market liquidity,” said Ming Ming, chief economist at CITIC Securities.

“The PBOC will not conduct overnight reverse repos too frequently, and may operate in the middle, end of the month, or end of the quarter.”

China’s 30-year government bond yield rose 2.5 basis points (bps) following the PBOC statement, while 10-year yields were up around two basis points.

“For market participants, the asymmetry of overnight lending and borrowing rates should be a warning to the market, with a clear intention to cool the (bond) market,” said Zhou Shilei, director of global financial market department at UOB (China).

“Specifically, the central bank’s first temporary overnight open market operation is expected to be a repo, which may take place this week.”

The central bank told Reuters last week it has hundreds of billions of yuan worth of bonds at its disposal to borrow, and will sell them depending on market conditions, part of a plan markets see as an effort to cool a hot bond rally.

The central bank’s temporary overnight borrowing and lending operations will be performed in the afternoon of each working day based on market conditions, according to the PBOC statement, whereas routine daily operations are conducted in the morning.