Shares in Asia higher as China rate cut welcomed

Representational ImageAsian stocks on Monday were close to wiping out all their losses since China’s shock currency devaluation in August, as global equities rallied after the Chinese central bank cut rates and United States tech giants provided upbeat earning guidance.

While in Sydney, Australia’s benchmark index the S&P/ ASX 200 was up 0.33% at 5,369.50, and South Korea’s, benchmark Kospi index was 0.32% at 2,046.45 points.

The CSI 300 Index retreated 2 per cent. Hong Kong’s Hang Seng China Enterprises Index lost 1.5 per cent, while the Hang Seng Index slid 0.9 per cent.

Before that, the benchmark deposit rate was 1.75 percent, and commercial banks were allowed to set their own one-year deposit rates as high as 2.625 percent, or 50 percent above the benchmark.

“With economic momentum supposed to fall even further next year, I highly doubt that we have witnessed the conclusion of monetary easing from China”, said FXTM chief market Analyst, Jameel Ahmad.

While analysts welcome the PBOC’s move, many say China is still a long way from forming a market-based rate system as it needs to nurture a new pricing scheme to reflect supply and demand dynamics.

In a bid to jumpstart China’s flagging economy, the People’s Bank of China announced on Friday that it was cutting interest rates for the sixth time since November.

It also removed a ceiling on deposit rates, a measure seen as aimed at ushering in more competition between Chinese banks and lead to more efficient credit pricing to reduce wasteful investment.

Weak results from the Agricultural Bank of China Ltd late on Friday have heightened those concerns. Gains were fairly limited, however, with Shanghai composite index up just 0.5%.Naoki Tashiro, the president of TS China Research, noted that in the week following each of the past year’s five rate mainland shares rose three times but fell twice.

It is seen as a long-term step toward a more market-driven banking sector, if smaller banks lend funds to parts of the economy shunned by large banks.

Total volume of A shares traded in Shanghai was 17.73 billion shares, while Shenzhen volume was 20.71 billion shares.

Tokyo’s Nikkei 225 index rose 0.7 percent to 18,963.53 and China’s Shanghai Composite Index gained 0.7 percent to 3,437.58.

Bankers who spoke to Reuters doubted such a scenario, reckoning lenders will focus on protecting margins instead, but the changing landscape added to worries about pressures facing banks as the economy slows. The easing came after China reported that its third-quarter growth slowed to 6.9% year over year, marking the slowest rate of expansion since the beginning of 2009. It was last up 0.6% in early Asia trade at $0.7255.

The US dollar was last down 0.4% against the Japanese yen at ¥ 120.95.