HONG KONG – China’s shares finished higher yesterday as its central bank announced a record cut to a benchmark lending rate in a bid to boost its struggling economy. The Shanghai and Shenzhen exchanges were buoyant Monday after the Lunar New Year, leading gains in most Asian markets thanks to a holiday boost which pushed spending above pre-pandemic levels.
But both were down in early trade yesterday, as the People’s Bank of China announced it was lowering the five-year loan prime rate (LPR), used to price mortgages, from 4.2% to 3.95%. The markets ticked up by the close.
Beijing’s measures are intended to rally dwindling growth and counter rate hikes in other major economies, as the world’s second-largest economy battles a prolonged property sector crisis and a global slowdown.
The Chinese central bank’s moves, aimed at pushing commercial banks to grant more credit at better rates, was the largest reduction since the key LPR was revamped in 2019, Bloomberg reported. While the rate cut may offer relief, Stephen Innes, of SPI Asset Management, suggested managing expectations.
“The government is likely to prioritise piecemeal measures over implementing substantial fiscal stimulus packages,” he said. “This cautious approach reflects a shift away from the previous ‘growth at all costs’ model, with current emphasis placed on achieving technological self-sufficiency and ensuring macro-financial stability.
With US markets closed Monday for a holiday, investors are eyeing major upcoming earnings’ reports as well as policy meeting minutes from the US Federal Reserve and European Central Bank which might offer insights about hoped-for interest rate cuts. “Markets have adjusted to the idea that rate cuts would come later, and probably be less important than what was originally priced,” Vincent Juvyns, global market strategist for JPMorgan Asset Management, told Bloomberg Television.
Data released Friday showed a greater-than-expected rise in US wholesale prices, crushing hopes of an early interest rate cut by the Fed. In Asia, Tokyo and Hong Kong, shares rose at the open yesterday, with investors awaiting further direction from Wall Street.
“The Japanese market is expected to move in a narrow range today as the US market was closed for a holiday, so there’s a dearth of fresh clues,” said senior market analyst Toshiyuki Kanayama of Monex.
Tokyo stocks closed lower, and Sydney, Seoul and Wellington were also down. Anglo-Australian mining giant BHP reported an 86% slump in half-year net profit, hit by a write-down of its nickel assets and costs related to a 2015 Brazilian mining disaster. – Nampa/AFP