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Jun 06, 2020 PRINT EDITION

China shares end at 2-month lows after new lending tool hits banks

SHANGHAI: China's main equity indexes closed down at two-month lows on Thursday after the country's central bank announc

December 20, 2018

SHANGHAI: China's main equity indexes closed down at two-month lows on Thursday after the country's central bank announced a new targeted lending tool, amid the U.S. Federal Reserve raising rates and largely maintaining outlook for more hikes next year.

** At the close, the Shanghai Composite index was down 0.52 percent at 2,536.27.

** The blue-chip CSI300 index was down 0.77 percent, with its financial sector sub-index lower by 1.12 percent.

** Analysts expect the new targeted medium-term lending facility to reduce the possibility of a reserve requirement ratio cut this year, which would have reduced the level of cash banks must hold as reserve.

** The consumer staples index ended down 0.21 percent, the real estate index lost 0.23 percent and the healthcare sub-index dropped 1.28 percent.

** The SSE 50 index of the 50 most representative blue-chips on the Shanghai stock exchange, lost 1.5 percent to its lowest close since May 2017.

** On Wednesday, China's central bank rolled out a policy tool to spur lending to small and private firms, which some analysts said was effectively a targeted rate cut. The Targeted Medium-term Lending Facility (TMLF) is the PBOC's latest step to support a slowing economy amid a trade dispute with the United States.

** But some analysts expressed doubt about the effectiveness of the measure.

** "The (TMLF) could boost market sentiment, but is far from enough to stop the ongoing growth slowdown. Having slowed for the past four quarters, Chinese economy is only halfway through the current down-cycle," Macquarie economists Larry Hu and Irene Wu said in a note. "We expect policy makers to ease shadow lending in 1H19 to boost infrastructure spending, then ease property measures significantly in 2H19."

** The U.S. Federal Reserve raised key overnight lending rate rates by 25 basis points as expected to a range of 2.25 percent to 2.50 percent. It kept the core of its plan to tighten monetary policy further, despite rising uncertainty about global economic growth.

** The smaller Shenzhen index ended up 0.2 percent and the start-up board ChiNext Composite index was higher by 0.736 percent.

** Around the region, MSCI's Asia ex-Japan stock index  was weaker by 1.18 percent, while Japan's Nikkei index closed down 2.84 percent.

** At 07:14 GMT, the yuan was quoted at 6.9011 per U.S. dollar, 0.13 percent weaker than the previous close of 6.892.

** The largest percentage gainers in the main Shanghai Composite index were A-Zenith Home Furnishings Co Ltd, up 9.99 percent, followed by Kunwu Jiuding Investment Holdings Co Ltd , gaining 9.99 percent and Nanjing Textiles Import & Export Corp Ltd, up by 9.99 percent.

** The largest percentage losses in the Shanghai index were Zhejiang Jiahua Energy Chemical Industry Co Ltd down 10.01 percent, followed by Fujian Raynen Technology Co Ltd  losing 10 percent and Dalian Sunasia Tourism Holding Co Ltd down by 9.99 percent.

** So far this year, the Shanghai stock index is down 23.3 percent, the CSI300 has fallen 23.9 percent while China's H-share index listed in Hong Kong is down 14.1 percent. Shanghai stocks have declined 2.01 percent this month.

** About 12.06 billion shares were traded on the Shanghai exchange, roughly 74.8 percent of the market's 30-day moving average of 16.11 billion shares a day. The volume in the previous trading session was 10.77 billion.

Copyright Reuters, 2018