The People’s Bank of China (PBOC) plans to lower prime lending rates on Monday as part of the Chinese government’s comprehensive strategy to support the struggling real estate sector and boost economic growth. This expected move follows a series of recent monetary, fiscal and liquidity measures taken by the government to combat deflationary pressures and stimulate the economy.
People’s Bank of China Governor Pan Gongsheng announced Friday at a financial forum in Beijing that the lending prime rate (LPR) will be cut by 20-25 basis points. The announcement, reported by state news agency Xinhua, marks a decisive step by the central bank to combat the economic slowdown.
In addition to rate cuts, the People’s Bank on Friday announced efforts to inject more than $100 billion into China’s stock market. With these measures, the Shanghai Blue Chip Index rose 3.6% and the MSCI Asia Ex-Japan Index rose 1.6%, its best day since September 26.
China’s recently released economic data, while reflecting challenges, were not as negative as some had expected. The country’s annual GDP growth rate in the third quarter was 4.6%, slightly above consensus expectations. But economist Phil Suttle said the seasonally adjusted annual growth rate for the past two quarters was just 2.75%, the lowest on record excluding the coronavirus-related downturn.
Despite the positive stock market reaction, bond yields are trending lower. After an initial rebound on hopes of economic reflation from support measures, the 10-year bond yield is once again approaching 2.00%.
With the US-China trade war rekindling, the geopolitical situation is also having an impact on market sentiment. Republican presidential candidate Donald Trump says he intends to impose tariffs of 150% to 200% on China if it takes military action against Taiwan, according to a report in the Wall Street Journal on Friday. Ta.
Meanwhile, the U.S. economy continues to perform well, with recent economic data exceeding expectations, with GDP growth exceeding 3%, earnings strong and Wall Street hitting new all-time highs. However, Raymond James analysts expressed caution, noting that certain technical indicators and short-term options suggest the market may be poised for a period of consolidation or short-term correction. are.
Global financial conditions are easing as central banks around the world cut interest rates and stock markets rise. Investors in Asia are keeping an eye on the US dollar, which has shown signs of recovery, hitting a three-month high recently.
In the coming days, the market will also focus on Malaysia’s official GDP statistics for the third quarter to be released on October 21, 2023. In addition, Reserve Bank of Australia Deputy Governor Andrew Hauser is scheduled to speak, potentially providing further insight into the region’s economic outlook.
Reuters contributed to this article.
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