Tag Archives: Hang Seng

China reduces Reserve Requirement Ratio by 50bp

China’s central bank said over the weekend it will lower the reserve requirement ratio (RRR) that banks must hold as reserves to 20.5 percent from 21 percent, effective Friday. This 50 basis points (bp) reduction will free up tens of billions of dollars for loans at a time when the growth rate is expected to drop from last quarter’s 8.9 percent to closer to 8 percent. This is the second rate cut in two months.

Chinese real construction companies, and global commodity stocks, especially base metals like copper and aluminium, should benefit from this move. Investors hoping for more lending in the real estate sector pushed up Chinese property shares and banks. Hong Kong-listed China Resources Land Ltd. rose 1 percent and China Overseas Land & Investment Ltd. added 1.3 percent. China Construction Bank Corp. added 1.1 percent.

World stock markets were also positive on hope that Greece will clinch the aid to avoid bankruptcy. Whether Greece can actually implement and deliver an auterity plan is not a consideration for now! Continue reading China reduces Reserve Requirement Ratio by 50bp

China raises interest rate by 0.25 percent

The benchmark interest rate in China was last reported at 5.81 percent. In China, interest rates decisions are taken by The Peoples’ Bank of China Monetary Policy Committee. The PBC administers two different benchmark interest rates the benchmark lending rate, which is the one year PBC lending rate and the benchmark rate of central bank lending that is the rediscount rate.

This increase in interest is a good sign that China’s economy is poised for more growth and they want to control inflation that will accompany that growth. This interest rate should be seen positively for all global commodities even if there is a downward reaction in short term.

“These policy moves could be front-loaded in coming months, as headline inflation figures remain high and economic growth faces overheating risks early next year,” said Wang Qian, the brokerage’s Hong Kong-based chief China economist.

Indian Stock Market Review – April 20, 2010

Indian Market:

  • The RBI said that the weight of monetary policy balance may have to shift to containing inflation since high inflation itself will dampen recovery in growth. The RBI said it has not increased interest more than 25 bps because it believes that investments need to come in to improve the supply side inflation.
  • CRR is hiked to 6% from 5.75%, the reverse repo is raised to 3.75% from 3.5% and the repo is increased to 5.25% from 5%. While the policy rates are effective immediately, the CRR hike will be effective from April 24.
  • Hero Honda Motors after market hours announced its net profit rose 48.8% to Rs 598.81 crore on 19.6% rise in total income to Rs 4191.81 crore in Q4 March 2010 over Q4 March 2009.
  • Nifty snapped the five-day losing streak led by bounce in global markets post Goldman Sachs woes and RBI’s Monetary Policy, which was in-line with expectations. The 30-share BSE Sensex closed at 17,460 up 60 points and the 50-share NSE Nifty rose 26.45 points or 0.51% to 5.230

Global Markets:

  • US markets rose on Monday as investors reassessed the potential damage of the fraud case against Goldman Sachs and earnings optimism grew – the Dow Jones Industrial Average rose 73.59 points (0.67%) to 11092
  • European stocks rose in early trade on Tuesday, reversing losses from the previous session, with European banks gaining and car makers strong as Daimler rose after doubling its profit outlook.
  • Inflation rate in UK jumped more than economists forecasted in March, breaching the government’s upper limit for the second time this year after energy costs rose within weeks of the election. Consumer prices climbed 3.4 percent from a year earlier.
  • Asian stocks rose on Tuesday, led by finance companies, as regulators were split on suing Goldman Sachs Group Inc., easing concern over the impact increased regulation on banks. The key benchmark indices in Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan rose by between 0.25% to 0.76%