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Shanghai index up 1.08% as reserve ratio is cut to spur growth
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SHANGHAI stocks gained the most in one month today after the central bank lowered reserve requirement ratio for targeted banks in a fresh bid to bolster economic growth.
The benchmark Shanghai Composite Index rose 1.08 percent, the biggest gain since May 12, to 2,052.53 points. Daily turnover was 65.4 billion yuan (US$10.5 billion).
The People’s Bank of China said yesterday that the reserve requirement ratio will be cut 0.5 percentage points for two-thirds of city commercial banks, 80 percent of rural commercial banks above county level, and 90 percent of rural cooperative banks above county level, effective from next Monday.
It is the second cut in two months after the PBOC lowered the ratio by 2 percent for county-level rural commercial banks and rural cooperatives in April.
Zhu Haibin, chief China economist of JPMorgan, estimated the two rounds of cuts will release up to 194 billion yuan of liquidity to the banking system.
“The impact of such liquidity measures will be rather moderate,” Zhu said in a note today.
Analysts at Everbright Securities said although the impact may be limited, it raised expectations that the government may take more actions to boost growth if economy slows further.
Lenders gained. Industrial and Commercial Bank of China, the country’s biggest lender, increased 1.9 percent to 3.73 yuan. Shanghai Pudong Development Bank added 0.9 percent to 9.63 yuan. Industrial Bank climbed 1.5 percent to 9.94 yuan.
Brokerages also advanced after the China Securities Regulatory Commission said in Weibo microblog late night that it had approved 10 initial public offerings, marking the official restart of IPOs.
CITIC Securities, China’s biggest broker, rose 2.9 percent to 11.50 yuan. Sinolink Securities jumped 5.5 percent to 20.38 yuan.
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