China shares dip as central bank cuts key rate

China shares dip as central bank cuts key rate

Mainland China's shares fell on Tuesday, as its central bank announced a record cut to a benchmark lending rate, hoping to boost its struggling economy
Mainland China's shares fell on Tuesday, as its central bank announced a record cut to a benchmark lending rate, hoping to boost its struggling economy. Photo: Pedro PARDO / AFP
Source: AFP

PAY ATTENTION: "AI for Journalists: Power Up Your Reporting Ethically" FREE Online Workshop by Rianette Cluley, Briefly News Editor-in-Chief. REGISTER NOW

Mainland China's shares fell on Tuesday as its central bank announced a record cut to a benchmark lending rate in a bid to boost its struggling economy.

The Shanghai and Shenzen exchanges were buoyant Monday after the Lunar New Year, leading gains in most Asian markets, thanks to a holiday boost that pushed spending above pre-pandemic levels.

But both were down in early trade Tuesday, as the People's Bank of China announced it was lowering the five-year loan prime rate (LPR), used to price mortgages, from 4.2 to 3.95 percent.

Beijing's measures are aimed at rallying dwindling growth and countering rate hikes in other major economies, as the world's second-largest economy battles a prolonged property-sector crisis and a global slowdown.

The Chinese central bank's moves, aimed at pushing commercial banks to grant more credit at better rates, was the largest reduction since the key LPR was revamped in 2019, Bloomberg reported.

Read also

China central bank cuts benchmark lending rate to boost economy

While the rate cut may offer relief, Stephen Innes, of SPI Asset Management, suggested managing expectations.

"The government is likely to prioritize piecemeal measures over implementing substantial fiscal stimulus packages," he said.

"This cautious approach reflects a shift away from the previous 'growth at all costs' model, with current emphasis placed on achieving technological self-sufficiency and ensuring macro-financial stability."

With US markets closed Monday for a holiday, investors are eyeing major upcoming earnings reports as well as policy meeting minutes from the US Federal Reserve and European Central Bank that might offer insights about hoped-for interest rate cuts.

"Markets have adjusted to the idea that rate cuts would come later and probably be less important than what was originally priced," Vincent Juvyns, global market strategist for JPMorgan Asset Management, told Bloomberg Television.

Data released Friday showed a greater-than-expected rise in US wholesale prices, crushing hopes of an early interest-rate cut by the Fed.

Read also

China new year holiday spending surges past pre-pandemic levels

In Asia, Tokyo and Hong Kong shares rose at the open Tuesday, with investors awaiting further direction from Wall Street.

"The Japanese market is expected to move in a narrow range today as the US market was closed for a holiday, so there's a dearth of fresh clues," said senior market analyst Toshiyuki Kanayama of Monex.

Sydney's shares were down, along with Seoul and Wellington.

Anglo-Australian mining giant BHP reported an 86 percent slump in half-year net profit, hit by a writedown of its nickel assets and costs related to a 2015 Brazilian mining disaster.

Key figures around 0230 GMT

Tokyo - Nikkei 225: FLAT at 38,449.74

Hong Kong - Hang Seng Index: UP 0.1 percent at 16,166.69

Shanghai - Composite: FLAT at 2,909.76

Euro/dollar: DOWN at $1.0765 from $1.0769 on Monday

Dollar/yen: UP at 150.31 yen from 150.17 yen

Pound/dollar: UP at $1.2585 from $1.2584

Euro/pound: UP at 85.54 pence from 85.56 pence

Read also

Asia stocks mixed as China enjoys Lunar New Year bump

West Texas Intermediate: UP 0.3 percent at $79.45 per barrel

Brent North Sea Crude: DOWN 0.1 percent at $83.44 per barrel

London - FTSE 100: UP 0.2 percent at 7,728.50 points (close)

New York - Dow: DOWN 0.4 percent at 38,627.99 points (close)

Source: AFP

Authors:
AFP avatar

AFP AFP text, photo, graphic, audio or video material shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium. AFP news material may not be stored in whole or in part in a computer or otherwise except for personal and non-commercial use. AFP will not be held liable for any delays, inaccuracies, errors or omissions in any AFP news material or in transmission or delivery of all or any part thereof or for any damages whatsoever. As a newswire service, AFP does not obtain releases from subjects, individuals, groups or entities contained in its photographs, videos, graphics or quoted in its texts. Further, no clearance is obtained from the owners of any trademarks or copyrighted materials whose marks and materials are included in AFP material. Therefore you will be solely responsible for obtaining any and all necessary releases from whatever individuals and/or entities necessary for any uses of AFP material.