China’s Rate Cut will Not Lift Stocks Long Term
China, one of the main engines of the world economy, has overtaken Greece at the top of the worry list of global investors, who fret its economy is growing at a much slower pace than the official 7 percent target for 2015.
“Currently, there is still downward pressure on China’s economic growth,” the central bank said in a separate statement. “There is also relatively big volatility in global financial markets, which require more flexible usage of monetary policy tools.”
The People’s Bank of China (PBOC) said it was cutting the one-year benchmark bank lending rate by 25 basis points to 4.6 percent, cutting one-year benchmark deposit rates by the same amount, and reducing reserve requirements (RRR) by 50 basis points to 18 percent for most big banks.
Major Chinese stock indexes nosedived more than 7 percent on Tuesday, hitting their lowest levels since December, following a more than 8 percent plunge on Monday.
The slump had resumed last week despite Beijing’s efforts to arrest a 30 percent crash earlier in the summer with hundreds of billions of dollars of state-backed share purchases. This time, the government appeared to be sitting on its hands until Tuesday’s response, which aimed more at shoring up economic fundamentals than underpinning stocks.
Premier Li Keqiang said today there was no basis for further depreciation of the yuan and the exchange rate will be kept “basically stable at an adaptive and equilibrium level.”
Li made the remarks while meeting with First Deputy Prime Minister of Kazakhstan Bakytzhan Sagintayev in Beijing.
Li said that China recently improved the yuan fixing as an “appropriate response” to international financial market development.
“Such adjustment was also made as part of China’s ongoing reform efforts,” he noted.
On August 11, the People’s Bank of China, announced that daily central parity quotes reported to the China Foreign Exchange Trade System before the market opens should be based on the closing rate of the inter-bank foreign exchange market on the previous day, supply and demand in the market, and price movement of major currencies.
The post China’s Rate Cut will Not Lift Stocks Long Term appeared first on Live Trading News.