Denis Staunton
Tue Sept 24 2024
China’s central bank has unveiled a broad package of stimulus measures, cutting the cost of existing mortgages and lowering a key interest rate.
The measures, which will also make lending easier by cutting the amount of cash banks need to hold in reserve, come amid warnings that China could miss its gross domestic product (GDP) growth target for 2024 of about 5 per cent.
A three-year long property market slump and a weak labour market have dampened consumer confidence, contributing to a slowdown in economic growth.
But Pan Gongsheng, governor of the People’s Bank of China (PBOC) said guiding lenders to lower interest rates on existing home loans by about 0.5 points should boost consumer spending.
“The reduction in existing mortgage interest rates is expected to benefit 50 million households or 150 million people, reducing household interest expenses by an average of about 150 billion renminbi (€19 billion) per year, which will efficiently boost consumption and investment,” he told a press briefing in Beijing on Tuesday.
The minimum down payment for buying a second home will be cut from 25 per cent to 15 per cent, the same level as for first homes. And the central bank will fully fund a 300 billion renminbi scheme to enable state-owned enterprises to buy unsold apartments for use as affordable housing.
The reserve requirement ratio (RRR) – the amount of cash banks must hold in reserve – will also be cut by 0.5 points, a move Mr Pan said would add one trillion renminbi in liquidity to the banking system. He suggested there could be a further RRR cut of 0.25 or 0.5 points later this year.
The seven-day reverse repo rate, a key short-term interest rate, will drop to 1.5 per cent from 1.7 per cent and benchmark lending and deposit rates will be guided downwards.
“Capital will be injected to different banks in turns and with different policies,” said Li Yunze from the National Financial Regulatory Administration, China’s new financial services regulator, who joined Mr Pan at the briefing.
The central bank governor announced an 500 billion renminbi fund to help stockbrokers, insurance companies and funds to buy equities and the bank will provide a further 300 billion renminbi to help companies to conduct share buy-backs.
Mr Pan said the authorities were looking at the idea of a state-backed stabilisation fund which could help to reinforce confidence in equity markets.
China’s CSI 300 stock market index rose by 4.3 per cent on the back of the announcement, which was unusual in terms of the number and range as well as the significance of the measures unveiled at the same time.
But as investor confidence in China has fallen, the CSI 300 index is down 4 per cent since the beginning of this year and has lost about a third of its value over the past three years.
Recent weeks have seen a succession of disappointing economic data in China and Tuesday brought news the youth unemployment rate hit a record high in August for the second month in a row.
The National Bureau of Statistics (NBS) said that 18.8 per cent of Chinese people in urban areas between the ages of 16 and 24, excluding students, were unemployed.
The overall urban unemployment rate rose slightly to 5.3 per cent and the NBS said the increase was mainly due to college graduates entering the labour market. A record 11.8 million people graduated from Chinese third-level institutions this summer, many of them entering the weakest job market the country has seen for years.
Denis Staunton is China Correspondent of The Irish Times
FTSE 100 lifted after Chinese stimulus package boosts global markets
24 September 2024, 17:14
London’s premier index ticked up to end the day 0.28% higher, with most of its early gains cancelled out by the close.
The FTSE 100 nudged upwards on Tuesday after investors were buoyed by economic stimulus measures by China early in the day.
London’s premier index rose 23.05 points, or 0.28%, to end the day at 8282.76, with most of its early gains cancelled out by the close.
AJ Bell head of financial analysis Danni Hewson said: “An early boost to investor sentiment from China’s economic stimulus fizzled out as the day progressed, although mining stocks continued their run of good form.
“There’s still a lot of volatility around as investors second guess last week’s jumbo Fed move and wonder if today’s weak US consumer confidence data heralds a gloomy fourth quarter.
“Coming off the back of another slew of record-breaking highs investors would do well not to read too much into today’s slight cooldown, although there is plenty of other data which might upset the apple cart later in the week.
“London markets have been rather more subdued but there have been some decent individual performances with Raspberry Pi’s first results since IPO proving that UK tech stocks do have legs.”
In European markets, Frankfurt’s Dax index rose 0.75%, while the Cac 40 in Paris had closed up 1.28%.
Stateside, shortly after markets had closed in Europe the S&P 500 had gained 0.23%, while the Dow Jones was 0.12% higher.
On currency markets the pound had gained 0.21% against the dollar at 1.3375 and had dropped 0.15% against the euro at 1.1996.
In company news, budget computer firm Raspberry Pi revealed that profits were stronger than expected in its first update since floating on the London stock market earlier this year.
The stock market debutante told shareholders that revenues jumped by 61% to 144 million US dollars (£107.9 million) over the six months to June 30, compared with the same period a year earlier.
Shares finished 6.61% up for the day.
Elsewhere, retailer Card Factory revealed tumbling profits after seeing costs soar due to higher staff wages after this year’s National Living Wage hike.
The chain, which has more than 1,070 stores across the UK and Ireland, reported a 43% drop in pre-tax profits to £14 million for the six months to July 31.
It said the hit came after its wage bill was sent surging by April’s near 10% increase in the National Living Wage.
Shares plunged 21.12% on Tuesday.
Brent crude oil futures were up 1.475% to 74.99 US dollars as markets were closing in London.
The biggest risers on the FTSE 100 were Anglo American, up 141p to 2263.5p, Antofagasta, up 115p to 1940p, Rio Tinto, up 219.5p to 5049p, Prudential, up 26.2p to 664.8p, and Glencore, up 15p to 399.85p.
The biggest fallers on the FTSE 100 were Smiths Group, down 95p to 1725p, Vistry, down 25p to 1327p, CocaCola HBC, down 40p to 2688p, Howden Joinery, down 13.5p to 933.5p, and Segro, down 11.6p to 871p.
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