Amid mounting concerns about the Chinese economy, including the real estate industry, pan-Chinese stocks are weakening after the Chinese central bank announced an unexpected policy rate cut on the 21st.
According to Bloomberg, as of 10:20 a.m., Hong Kong’s Hang Seng Index fell 0.88% from the previous session, and Hong Kong’s HSI, which consists of mainland Chinese companies listed in Hong Kong, also fell 0.67%.
Mainland China’s Shanghai Composite Index (-0.29%) and Shenzhen Component Index (+0.15%) are mixed trends.
Just before the opening of the Chinese stock market, the People’s Bank of China lowered its benchmark one-year loan preferential interest rate (LPR) by 0.1 percentage points to 3.45 percent per year, but the five-year LPR remained at the previous level of 4.2 percent per year.
Bloomberg said the rate cut fell short of market expectations, pointing out that the five-year LPR, known as the standard for mortgage loans, was frozen, contrary to market expectations.
Earlier, most experts predicted that the one-year and five-year LPR would be lowered by 0.15 percentage points.
Pan-Chinese stocks, including the Hang Seng Index (-1.54 percent), fell on disappointment that the People’s Bank of China cut LPR rates for one-year and five-year periods by 0.1 percentage points each on June 20.
Chinese economy is worse than it was then.
Concerns are growing in the market over the Chinese economy as economic indicators in July have been sluggish one after another amid the possibility of default (default) by large real estate company Country Garden.
Goldman Sachs also lowered its earnings per share (EPS) growth forecast for the Morgan Stanley Capital International (MSCI) China Index from 14% to 11%.
The yuan’s exchange rate against the dollar is rising.
The regional yuan/dollar exchange rate, which hit its highest level since early November last year on the 17th, fell below 7.3 yuan on the 18th amid Chinese authorities’ intervention.
However, after the announcement of interest rates, the regional yuan/dollar exchange rate is trading at 7.3063 yuan, up 0.0218 yuan from the previous day, and the offshore yuan/dollar exchange rate is trading at 7.3212 yuan, up 0.0148 yuan from the previous day.
