Chinese Stocks Languish Despite USD108 Billion Freed in Reserve Ratio Cut
Tang Shihua
/SOURCE : Yicai
Chinese Stocks Languish Despite USD108 Billion Freed in Reserve Ratio Cut

(Yicai Global) June 25 -- China's main stock indexes failed to bounce back today despite the central bank yesterday announcing plans to cut the reserve requirement ratio and release CNY700 billion (USD107 billion) liquidity into the banking system.

The benchmark Shanghai Composite Index closed at 2,858.34, down more than 1 percent from June 22, while the Shenzhen Component Index fell 0.9 percent to 9,324.83. The ChiNext index, which reflects the performance of small- and medium-sized growth stocks, closed down 0.72 percent at 1,538.57.

The People's Bank of China said it plans to reduce the required reserve ratio at domestic banks by 0.5 percentage point as of July 5, the third RRR cut this year. The additional liquidity would be used to support market-oriented debt-for-equity swaps and to boost lending to smaller companies, a PBOC representative said.

The yardsticks have been edging lower since late January amid concerns over slowing economic growth and uncertainties surrounding trade disputes with the United States. The Shanghai index hit a two-year low during intraday trading on June 22, while the ChiNext benchmark hit a 42-month low.

Steel stocks led the decline today, with Beijing Shougang leading losses (3.52 percent). Angang Steel slipped 2.95 percent while Baoshan Iron & Steel dipped 2.65 percent. Cement makers also bore the brunt, with several firms losing around 2 percent.

The world's largest bank by asset value, Industrial and Commercial Bank of China, slid nearly 2.3 percent, with two other banks closing down 1 percent or more.

Some spirits makers bucked the trend, with Wuliangye Yibin climbing 2.4 percent and Jiangsu Yanghe Brewery Joint-Stock rising 1.4 percent. Sector leader Kweichow Moutai rose throughout most of the day but wound up closing down 0.13 percent.

Oil services providers also fared well as global oil prices held up well. China Petroleum Engineering gained 2.76 percent while Zhongman Petroleum and Natural Gas Group and Xinjiang Beiken Energy Engineering Stock rose 2.1 percent and 1.75 percent.

Editor: James Boynton

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Keywords: Stock Markets , Require Reserve Ratio , Monetary Policy , Central Bank , Pboc