By
Steve Muchoki
April 16th, 2024
The growth of China’s Hang Seng Index was not replicated in the United States as all major indices gave up their gains to close Wednesday’s session in a bearish manner,
Key averages in China’s stock market, including the Hang Seng Index (INDEXHANGSENG: HSI) shot up today after the country’s apex bank, the People’s Bank of China (PBOC) cut key lending rates again. The bank reduced the one-year Loan Prime Rate (LPR) by 10 basis points while the 5-year LPR was also cut by 5 basis points.
The Hang Seng Index embodied the sentiments of investors as it surged by 3.42%, adding 824 points to 24,952.35. Other averages including the Shanghai Composite, SSE Composite Index (SHA: 000001) topped pared some of its gains after slipping 0.088% to 3,555.06, and the Shenzhen Component, SZSE Component Index (SHE: 399001) also slipped 0.063% to 14,198.30.
The reduction of the LPR by the Central Bank is like a targeted panacea for the country’s ailing real estate sector. With the rate cut, the PBoC has now made it easier to borrow, a move that will impact all major sectors, with a special emphasis on mortgages.
“Mortgages will now be slightly cheaper which should help shore up housing demand. The PBOC has already pushed banks to increase the volume of mortgage lending,” Sheana Yue, China economist at Capital Economics, said in a note after the announcement. “Targeted support for property buyers does appear to be limiting one of the more severe downside risks facing the economy.”
Following the rate cut update, a number of homegrown real estate stocks saw a bright day with embattled China Evergrande Group (HKG: 3333) rising 4.65% to HK$1.80, Sunac China Holdings Ltd (HKG: 1918) soaring by 15.22% to HK$10.90 and Country Garden Holdings Co Ltd (HKG: 2007) topped 4.35% to HK$6.96. Tech stocks also saw a massive upsurge in China as evidenced by the Hang Seng Tech Index which rose 4.5%.
China’s Hang Seng Index and the Opposite US Trend
The growth of China’s Hang Seng Index was not replicated in the United States as all major indices gave up their gains to close Wednesday’s session in a bearish manner, despite the US bond yields falling back slightly after shooting up earlier this week, with the 10-year retreating to 1.854% after hitting 1.9% earlier Wednesday as reported by CNBC.
The 30-year Treasury Bond dropped by 2 basis points to 2.167%.
“It is hard to get too excited with the overnight declines in yields, the economic backdrop is still pointing to an increase in inflationary pressures and resilient growth, pointing to the need for the Fed as well as other central banks to shift towards a tighter policy setting, thus higher global rates over 2022 still look very likely,” Rodrigo Catril, the senior FX strategist at National Australia Bank, wrote in a Thursday note.
The Dow Jones Industrial Average (INDEXDJX: .DJI) led the losses, shedding 339.82 points atop a 0.96% loss to 35,028.65. In tandem, the Nasdaq Composite (INDEXNASDAQ: .IXIC), and the S&P 500 (INDEXSP: .INX) dropped 1.15% and 0.97% and both closed at 14,340.26 and 4,532.76 on Wednesday respectively.