Markets cheer Beijing signal it's ready to prop up growth

Top News | Reuters and Stella Zhai 19 Nov 2019

Mainland and Hong Kong equity markets ended higher yesterday after China's central bank unexpectedly trimmed a closely watched short-term lending rate for the first time since 2015 - a signal to markets that policymakers are ready to act to prop up slowing growth.

The People's Bank of China said it was lowering the seven-day reverse repurchase rate to 2.5 percent from 2.55 percent.

The move cheered China's bond market and came just two weeks after the PBOC cut the borrowing cost on its medium-term lending facility - used by banks for longer-dated funding needs - by the same margin.

Both cuts raise the likelihood that the PBOC will reduce its new benchmark loan prime rate - off of which many lenders base their mortgage rates - this week.

Analysts say the unexpected cut also shows the central bank is keen to ease investor worries that higher retail inflation would prevent it from delivering fresh stimulus.

The Hang Seng Index closed 354 points higher at 26,681 points, following steep losses last week.

Index heavyweight Tencent gained 3.13 percent to HK$330, and Hong Kong Exchanges and Clearing went up 1.74 percent to HK$245 as the China Securities Regulatory Commission eased restrictions on Hong Kong-listed stocks in the mainland.

Shares of local developers overall rallied, led by Wharf Real Estate Investment, which went up 2.74 percent to HK$43.15.

Henderson Land Development rose 1.77 percent to HK$37.45, while Sun Hung Kai Properties and Sino Land both added over 1.6 percent to HK$109.20 and HK$11.38, respectively. New World Development was up 1.54 percent to HK$10.58 and CK Asset grew 1.16 percent to HK$52.45.

Best index performer Geely Automobile grew 4.47 percent to HK$15.44 after China's National Development and Reform Commission said last week the government is considering measures to loosen or cancel car-purchase restrictions.

China Mengniu Dairy dropped 1.35 percent to HK$29.15, losing the most among blue-chip stocks.

The Shanghai Composite Index added 0.6 percent to 2,909 points and the Shenzhen Component Index closed 0.7 percent higher at 9,715 points.

Separately, Morgan Stanley set the HSI target of 27,500 points by the end of next year - a significant improvement from the 24,400 target for the end of June next year.

It raised its rating of emerging equity markets to "equal-weight," with a "cautiously optimistic" outlook. It expects Hong Kong's economy to recover with a growth of 0.5 percent next year and 2 percent in 2021, while inflation next year is estimated at 3 percent due to increasing pork prices.

Investors were also eyeing developments in the Sino-US trade talks, which were "constructive," Xinhua News Agency said.

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