Bank of China: PBOC Rate Reform Plan Leads Chinese Stocks Higher
Shares in Asia rose on Monday, wading with U.S. Treasury yields after a prior week’s plunge.
Chinese shares climbed during day trading sessions. Notably, the SZSE Component index inched 2.96% higher to 9,328.97, while the Shenzhen exchange composite flew by 3.048%.
The SSE Composite index surged 2.1% to 2,883.10.
The Hang Seng index over in Hong Kong increased by 2.4% on Monday. All after shares of AIA, a life insurance company, surged 3.22%.
Cathay Pacific, the flag carrier airline of Hong Kong, surged 1.32% on Monday following CEO Rupert Hogg’s resignation on Friday.
The People’s Bank of China (PBOC) announced on Saturday that it would focus on improving its mechanism used to establish loan prime rate (LPR) starting this month.
The central bank of China will be able to “use market-based reform methods to help lower real lending rates.”
The major Chinese indexes gained bullish momentum afterward.
China tries and will continue to do so, to prevent a more dangerous economic slowdown, primarily caused by the China-U.S. trade war.
Reforms Are Key Weapon in Countering an Economic Slowdown
Last week, the People’s Bank of China (PBOC) announced its move to reform interest rates. This causes a steer for companies’ direct borrowing costs to lower levels. The move will also bolster a dampening economy, currently suffering trade-war damage.
According to the central bank of China, it will enhance a system used to establish the LPR to further decrease real interest rates for companies.
Analysts said on Monday that the announcement of the move underlines the apparent attempts of the government to implement reforms to battle an economic slowdown.
According to the central bank in a statement published on its website, “by reforming and improving the formation mechanism of LPR,” it will manage to use market-based methods of reform to support lower “real lending rates.”
The PBOC added that it would also further explore “market-based” reform on interest rates to “improve the efficiency of interest rate transmission.” It also said that it would improve on decreasing financing costs of the real economy.