PBOC rate cuts lifts China markets to highest close in two months, HK shares end lower
Markets in the mainland and Hong Kong traded in opposite directions on Monday, in the first day of trade since the People’s Bank of China announced it would ease lending rates for a sixth time in less than a year.
The Shanghai Composite Index rose for a third session in a row, closing up 0.5 per cent at 3,429.58, its highest close since late August. The large-company tracking CSI 300 also gained 0.5 per cent to 3,589.26.
Turnover increased to 454 billion yuan, compared with 426 billion yuan in the previous session.
The Shenzhen Composite Index advanced 0.7 per cent to 2,030.48, while the Nasdaq-style ChiNext index retreated 0.4 per cent to 2,527.48.
Hong Kong stocks reversed earlier gains and to close slightly lower from its previous close. The Hang Seng Index fell 0.2 per cent to 23,116.25. The Hang Seng China Enterprises index nudged 0.1 per cent higher to 10,747.68.
Turnover in Hong Kong was HK$72.8 billion, compared with Friday’s HK$72.5 billion.
Earlier in the day, the Communist Party kicked off the fifth plenary session of its top leadership, who were scheduled to discuss the country’s next five-year development blueprint.
On Friday, the People’s Bank of China cut benchmark interest rates for the sixth time since November, while it also lowered banks’ reserve requirement ratio by 50 basis, the fourth time that the central bank reduced the portion of money commercial banks have to park at the central bank.
Analysts said the rate cuts gave a boost to financial stocks, but the shaky economic backdrop had capped gains in the wider market.
“The rate/RRR cuts came on the heels of rather mixed Q3 data, suggesting that the economic backdrop remains wobbly,” said Aidan Yao, senior economist for AXA Investment Managers. “What’s more concerning is that deflation pressure remains intense, reflected in the negative Producer Price Index and GDP deflator, while CPI inflation also eased back from a 12-month high.”
Securities firms were among top gainers in both Hong Kong and Shanghai markets. Haitong Securities jumped 3.3 per cent in Hong Kong to HK$13.88 and advanced 1.5 per cent in Shanghai to 15.43 yuan. Citic Securities saw its Hong Kong-listed shares close up 1.9 per cent to HK$17.14, while its Shanghai-traded shares rose 1 per cent to 15.85 yuan.
In its Hong Kong debut, state-owned insurance giant China Reinsurance ended unchanged from its IPO price of HK$2.7, the upper end of its indicative range. Its turnover hit HK$ 2.7 billion, making it the most heavily traded stock in the markets.
However, oil stocks fell broadly after international crude futures retreated at the end of last week. PetroChina dropped 2.1 per cent to HK$6.19, CNOOC Ltd. lost 0.7 per cent to HK$8.87, and Sinopec shed 0.4 per cent to HK$5.75.
Louis Tse Ming-kwong, director of VC Brokerage, said the Hang Seng Index was likely to lose ground owing as some investor may be mulling the possibility of offloading positions in the belief that the rate cut will only provide a temporary lift to the market.
In the currency market, the People’s Bank of China set the yuan fixing on Monday 46 basis points or 0.07 per cent stronger at 6.3549 against the US dollar.
Both China’s onshore and offshore currency rates stayed more or less stable on Monday, in the wake of fresh monetary easing from the People’s Bank of China.
The offshore currency (CNH) strengthened slightly, rising 0.07 per cent to 6.3907, while the onshore currency (CNY) weakened marginally to 6.3517, down 0.05 per cent.
With additional reporting by Ben Westcott