Central bank move triggers rebound
Print Edition
SHANGHAI shares rebounded yesterday after the central bank cut the amount of money banks need to hold in reserve.
The Shanghai Composite Index rose 1.68 percent to 2,733.17 points at close, with most of its gain coming in the last hour of trading.
The reserve requirement ratio is cut by 0.5 percentage points for all banks from today, the People’s Bank of China said after markets closed yesterday, posting the first cut since October and the fifth since February last year.
“This reduction confirms that despite capital outflows, domestic monetary policy could still remain relatively independent and loose,” said Gao Ting, the head of China strategy with UBS Securities. “That should help alleviate A-share investors’ concerns over the monetary policy outlook.”
About 680 billion yuan (US$104 billion) of liquidity will likely be injected into the market after the move, Nomura Securities said in a report, forecasting three more cuts in the reserve requirement ratio and two more interest rate cuts in 2016 due to weakening economic momentum, falling equities and ongoing capital outflows.
Brokerages led the gain as CITIC Securities Co jumped 7.35 percent to 15.33 yuan and Orient Securities Co surged 7.93 percent to 18.64 yuan.
Gold producers also rallied. Zhongjin Gold Co rose 7.25 percent to 10.94 yuan, and Shandong Gold Mining Co went up 6.65 percent to 26.94 yuan.
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