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CHINA: PBOC Announces Policy Shifts to Support the Economy. 

CHINA
EM BulletAPACChinaEmerging Market NewsBulletGlobalFixed Income BulletsForeign Exchange BulletsRegionMarkets
  • China’s central bank announced a series of policy changes aimed at supporting the ailing economy and reaching the government’s 5% growth target.
  • Announcing rate cuts and RRR cuts together, PBOC governor Pan Gonsheng addressed the market at unscheduled press conference this morning.
  • Governor Pan announced a cut to the short-term interest rate, lowering of mortgage rates and a reduction of the Reserve Requirement Ratio (“RRR”).
  • The RRR is to be reduced by 0.50% and is forecast to release up to CNY1trillion of liquidity into the system.
  • The 7-day reverse repurchase rate  is reduced from 1.7% to 1.5%.
  • Additional measures announced are the increase of Core Tier 1 captial at the major commercial banks to strengthen their balance sheets which in turn will support further lending.
  • For existing mortgages, mortgage rates will be reduced.  For homebuyers, the minimum downpayment amount will be decreased.
  • Additional measures designed to support markets include a swap facility that securities firms, funds and insurance companies can access to buy stocks.
  • Markets reacted favourably to the news from the PBOC with the CSI 300 and the Shanghai Composite up 1%, bond yields rallied with the 10-year falling 1.5bps to 2.02% with the currency relatively stable.
  • There is a lot for markets to digest this morning, but this appears at first glance to be a step in the right direction in helping the property market correct and move forward in attempts to clear the backlog of unsold properties.   
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  • China’s central bank announced a series of policy changes aimed at supporting the ailing economy and reaching the government’s 5% growth target.
  • Announcing rate cuts and RRR cuts together, PBOC governor Pan Gonsheng addressed the market at unscheduled press conference this morning.
  • Governor Pan announced a cut to the short-term interest rate, lowering of mortgage rates and a reduction of the Reserve Requirement Ratio (“RRR”).
  • The RRR is to be reduced by 0.50% and is forecast to release up to CNY1trillion of liquidity into the system.
  • The 7-day reverse repurchase rate  is reduced from 1.7% to 1.5%.
  • Additional measures announced are the increase of Core Tier 1 captial at the major commercial banks to strengthen their balance sheets which in turn will support further lending.
  • For existing mortgages, mortgage rates will be reduced.  For homebuyers, the minimum downpayment amount will be decreased.
  • Additional measures designed to support markets include a swap facility that securities firms, funds and insurance companies can access to buy stocks.
  • Markets reacted favourably to the news from the PBOC with the CSI 300 and the Shanghai Composite up 1%, bond yields rallied with the 10-year falling 1.5bps to 2.02% with the currency relatively stable.
  • There is a lot for markets to digest this morning, but this appears at first glance to be a step in the right direction in helping the property market correct and move forward in attempts to clear the backlog of unsold properties.