China's Central Bank to cut reserve requirement ratio for fourth time

  • China's Central Bank to cut reserve requirement ratio for fourth time

China's Central Bank to cut reserve requirement ratio for fourth time

The RRR cut, announced on the last day of China's week-long National Day holiday, indicates that the central bank is anxious about the impact of "external shocks" to markets such as a speech last week by U.S. Vice President Mike Pence, said Zhang Yi, chief economist at Zhonghai Shengrong Capital Management.

"There's an acute shortage of confidence in the market". The losses in NY seeped into Asia, where Shanghai sank 3.7 percent, while Hong Kong lost 1.4 percent in the afternoon with property firms hit by expectations the city's banks will lift mortgage rates again as they track a likely Fed hike.

But Nicholson noted that if the trade situation deteriorates further, China will have a number of levers to save its economy because President Xi Jinping has "political capital".

U.S. Vice President, Mike Pence in his speech last week increased Washington's pressure crusade against Beijing on Thursday by hinting malign Chinese efforts to emasculate Donald Trump before congressional elections that are about to take place next month. And on Friday, Chinese technology stocks listed in Hong Kong, including Lenovo and ZTE Corp, slumped on a Bloomberg report that the systems of multiple United States companies had been compromised by malicious computer chips inserted by Chinese spies.

The move will be used to pay down 450 billion yuan ($65.6 billion) of medium-term lending facilities, it said, adding that it could also free up another 750 billion yuan in funds.

The PBOC would "maintain reasonably ample liquidity to drive the reasonable growth of monetary credit and social financing scale", it said. "Liquidity is not the issue". The key question is how to channel cash to the real economy. Yields of China's 10-year central government bonds have been trending lower this year, standing at 3.633 per cent on Monday. At present, the interest rate on China's benchmark bond is about 60 basis points higher than on the US one. "The narrowing interest rate differentials between China and the United States will exert more downward pressure on the RMB", wrote Nathan Chow, strategist at DBS Group Research. Prior to Wednesday's market opening, the PBOC set the yuan's midpoint rate at 6.8571 per dollar, the weakest level since August 24, and 131 pips or 0.19 percent weaker than the previous fix of 6.8440. On Wednesday morning, the onshore spot yuan traded in a thin range of less than 60 pips. Dealers were given a negative lead from Wall Street, where all three main indexes ended with sharp losses following news that unemployment had hit a 49-year low and wages saw healthy gains.

Shares in Asia stumbled in early trade on Monday as investors waited with bated breath as China's markets prepare to reopen following a week-long holiday and after its central bank cut banks' reserve requirements in a bid to support growth. Some market participants also said they were unwilling to hold large positions for their proprietary trade, amid global market uncertainty, during China's coming lengthy public holiday.