Update | Mainland China interest rate cut spurs Hong Kong and Shanghai stocks
The mainland’s interest rate cut, which took effect on Monday, sparked the Shanghai Composite Index to rise at the fastest rate in two weeks to close at a one-week high. The Hang Seng Index rose in tandem.
The Shanghai Composite Index closed up 3.03 per cent at 4,333.58 points on Monday, after falling for most of last week. It was the Shanghai index’s highest percentage gain since a 3.04 per cent rise on April 27, and one of the highest since January 21.
The Hang Seng Index closed up 0.51 per cent or 140.86 points at 27,718.2 points on Monday, the highest level in six days, while the Hang Seng H-shares Index closed up 0.95 per cent or 133.32 points at 14,182.98 points.
“The interest rate cut gave considerable support to the stock market for the entire day with the market,” said Gerry Alfonso, a director of Shenwan Hongyuan Securities. “The A-share market is very policy sensitive and this type of announcement tends to have a double effect: the actual effect of the interest rate cut by itself as well as the signaling effect.”
The interest rate cut overshadowed all other factors in boosting the Shanghai and Hong Kong stock markets on Monday, Alfonso said.
On Sunday, Beijing announced a cut in interest rates in a bid to spur the slowing mainland economy and cut fundraising costs for cash-starved businesses. The People’s Bank of China announced that the one-year benchmark lending rate would be cut by 25 basis points to 5.1 per cent, while the deposit rate would also go down 25 basis points to 2.25 per cent.
The turnover of the Hong Kong stock market was HK$133.13 billion on Monday, significantly lower than in recent weeks. Northbound turnover of the Shanghai-Hong Kong Stock Connect was 6.7 billion yuan, while southbound turnover was HK$5.86 billion.
“The interest rate cut was very likely already priced in by institutional investors in Hong Kong and hence you have less activity in the market,” Alfonso said.
