-1708423165.png)
PBoC Slashes LPR
Chinese stocks are surging higher today after the PBoC slashed its 5yr LPR rate to 3.95%. The .25% reduction marks the first LPR cut since June and the largest reduction since the bank introduced the rate in 2019, larger than the .15% cut the market was looking for. Lowering of the rate reduces mortgage rates for property buyers and marks the latest in a string of efforts aimed at spurring demand in the beleaguered property sector.
Continued Economic Support Efforts
The move is somewhat surprising given that the PBoC held its medium-term rate steady over the weekend. There has been plenty of chatter regarding the potential for fresh China stimulus in the wake of the recent $3 billion stock market package announced. Additionally, the PBOC recently added around 1 trillion CNY into the banking system by reducing its RRR by 0.5% and cutting rates on re-lending funds, intended to boost lending growth.
Bullish Risks
Today’s move shows that the country remains locked in a battle to drive activity higher, particularly within the struggling property sector. Given this backdrop, Chinese stocks look likely to continue to push higher for now, offering opportunities on the long side. Additionally, the prospect of further stimulus increases this bullish outlook.
Technical Views
Shanghai Composite
The rally in the SHCOMP has seen the market breaking out above the bear channel from last year’s highs. Price is now testing key resistance at the 2928.8391 level and with momentum studies bullish, the focus is on a break higher here and a continuation towards the 3043.1853 level next.
.png)
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.