Beijing cash boost flags concerns at the top on growth
Injection of funds calms market nerves, pointing to a balanced approach on need to reduce risks
Beijing yesterday stepped in to rescue the troubled stock and interbank markets with the first cash injection since February, in a sign the leadership would balance risk control and growth pace in directing the economy.
The People's Bank of China pumped 17 billion yuan (HK$21.3 billion) into the money markets through reverse bond repurchase agreements, or reverse repos, for the first time since February 7. The move sent interest rates on the interbank market lower while boosting stocks, which dropped to a three-week low on Monday.
The move sent a clear message to investors that the top officials are also worried about a sharp slowdown in the economy. They will give priority to risk control
"The move sent a clear message to investors that the top officials are also worried about a sharp slowdown in the economy," said Dong Jun, a Shanghai-based hedge fund manager. "They will give priority to risk control but they will also fine-tune policies to ensure the economy is on a growth track."
The Shanghai Composite Index added 13.76 points, or 0.7 per cent, to end at 1,990.06 yesterday, after sinking 1.72 per cent on Monday to its lowest close since July 9.
The new leadership is determined to de-leverage the economy, tighten monetary policies to force commercial banks to refrain from a lending spree and curb shadow banking.
At the weekend, Beijing announced a national audit of government debts, sparking further liquidity concerns on the stock market as investors braced for a selldown of state-held stakes by the authorities to repay loans.