China Market rises on stimulus steps

Mainland China equity market finished session sharp higher on Monday, 17 February 2020, as risk appetite buying underpinned after the central bank stepped in to help the economy with a rate cut, extra buying of securities and tax cuts to combat downside risks posed by the infection. At closing bell, the benchmark Shanghai Composite Index advanced 2.28%, or 66.61 points, to 2,983.62. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 3.18%, or 56.53 points, to 1,835.96. The blue-chip CSI300 index was up 2.25%, or 89.69 points, to 4,077.42.

The central bank and finance minister announced a slew of measures to support the economy as the country battles an outbreak of a new virus that has killed 1,770 people and infected nearly 70,000. On Monday, China's central bank tapped its medium-term lending facilities (MLF) to inject 100 billion yuan through seven-day reverse repos. The People's Bank of China will offer the one-year MLF rate at 3.15% down from 3.25%.

 

Over the weekend, China's central bank and financial regulators offered additional funds to banks. The bank regulator will ensure that small and medium enterprises (SMEs) get access to the 537 billion yuan (US$77 billion) of credit lined up to help them survive the business turmoil unleashed by the coronavirus epidemic.

In an effort to alleviate the shock of the virus outbreak on businesses, China is planning targeted tax cuts while increasing government spending, Finance Minister Liu Kun wrote Sunday in China's Communist Party magazine Qiushi. The Ministry of Finance said Saturday it would provide 8 billion yuan in a second round of support for virus prevention and control efforts. As of Friday, all levels of finance ministries in China had allocated 90.15 billion yuan in support, according to the central government. The People's Bank of China earlier this month pumped 1.7 trillion yuan into the financial system.

CURRENCY NEWS: China's yuan edged up against the dollar on Monday as China's policymakers signalled more support for the economy and businesses to offset the economic fallout from the coronavirus epidemic. Prior to the market opening on Friday, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 6.9795 per dollar, 0.0% firmer than the previous fix of 6.9843. The onshore yuan CNY=CFXS rose 0.17% to 6.9760 per dollar by midday, while the offshore yuan CNH=D3 was trading 0.21% stronger at 6.9781.

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