China's Monetary Stimulus Need Additional Fiscal Measures to Revive Long Term Market Sentiment, China Indexes Jumped 4%

Li Chen
24 Sep, 2024
Hong Kong

Stock market indexes in mainland China and Hong Kong soared as much as 4% after the central bank announced a slew of policy measures to revive economic growth and bolster market sentiment. 

The Han Seng index and CSI 300 indexes jumped nearly 4% after the People's Bank of China announced several measures to increase liquidity in the financial system, facilitate new home purchases, and lower the burden on existing home loan borrowers. 

The central bank lowered its reserve requirement ratio for commercial banks by 50 basis points to around 6.6%, in a move that is expected to inject one trillion yuan or $141 billion liquidity into the banking system. 

Governor Pan Gongsheng, at a press conference, also said that the central bank is prepared to lower the reserve ratio requirement by as much as an additional 50 basis points before the end of the year if needed. 

Governor Gongsheng also added that the down payment required for the second home purchase is lowered to 15% from the current 25% and interest rates for existing home loans by 50 basis points that will help about 50 million households or 150 million people, reducing annual household interest payment by 150 billion yuan. 

To send a strong signal to financial markets and underscore the importance of the latest measures, the central bank announced measures in a joint conference held with Li Yunze, the minister of the National Administration of Financial Regulation, and Wu Qing, chairman of the China Securities Regulatory Commission. 

The central bank plans to set up a loan facility for listed companies, stock brokerage firms, and mutual fund companies to purchase listed stocks and provide additional support to the stock market. 

Governor Gongsheng announced that the seven-day repo rate will be lowered to 1.5% from 1.7% and added that the move is expected to lower the medium-term loan rates by 0.3% and the loan prime rate by between 0.2% and 0.25%. 

The central bank announced a slew of new measures after the previous fund of 300 billion yuan to support the purchase of unsold residential properties failed to make a dent in the property weakness. 

The central bank's delayed measures are not likely to alter the downward trajectory of the stock market in the coming months without additional broad fiscal measures, as weak investor confidence and weakening consumer sentiment dominate trading. 

 

China Stock Movers 

The Hang Seng index soared 3.5% to 18,892.29, and the mainland-focused CSI 300 index jumped 3.4% to 3,323.27. 

Banks and property stocks soared after the central bank announced wide-ranging measures to stimulate the economy and inject financial liquidity. 

China Merchants Bank soared 10.5% to HK $34.30, Bank of China increased 3.1% to HK $3.66, and Industrial and Commercial Bank of China gained 5.2% to HK $4.67. 

Ping An Insurance jumped 7.1% to HK $40.45, and China Life Insurance added 6.1% to HK $12.94. 

China Resources Land added 5.9% to HK $22.40, China Vanke gained 2.9% to HK $4.69, and Longfor Group Holdings advanced 4.2% to HK $9.14.