Investors react to China's broad rate cuts
- China's central bank will cut banks' reserve requirement ratio by 50 basis points and further reduce key interest rates to support a recovery in prices, its governor Pan Gongsheng said on Tuesday."The market reaction so far, I think is positive. While there was some anticipation that stimulus measures would be announced after they mentioned there was going to be a press briefing, the package of measures so far, I would say, is probably larger than what market was expecting.
"The chair of the CSRC is now also announcing some measures to support M&A activity, etc. So this looks like it is a comprehensive package, not only from the central bank, but also from the other financial regulators, I think in part designed to not only lower borrowing costs, but also to inject more liquidty into the economy and boost the equity market.
"Taken as a whole, this could help support the economy. Whether or not it is sufficient to address some of the underlying issues, particularly around the lack of confidence in the economy, I think still remains to be seen."“The move probably comes a bit too late, but it is better late than never. With an elevated real interest rate, poor sentiment and no rebound in the property market, China needs a lower-rate environment to boost confidence.
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