SHANGHAI: China stocks rose slightly on Friday after data showed parts of the economy were regaining some momentum, while the central bank’s decision to cut the amount of cash that banks must hold as reserves also helped sentiment.
The yuan climbed to its strongest in two weeks against the dollar following the data.
The blue-chip CSI 300 Index edged up 0.1% by the midday recess, while Hong Kong’s Hang Seng Index climbed 1.7%.
China’s industrial output and retail sales growth in August both beat expectations, suggesting a recent flurry of support measures may be starting to slowly stabilise its wobbly economic recovery.
But a slump in China’s crisis-hit property sector worsened, with deepening falls in new home prices, property investment and sales, highlighting that more support will be needed.
Meanwhile, the People’s Bank of China (PBOC) said it would cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points (bps) from Friday.
“We think this moderate RRR cut is a further sign that the PBOC and top policymakers have become increasingly concerned about the ongoing economic downward spiral,” said Ting Lu, chief China economist at Nomura. Shares in mainland-listed healthcare and semiconductors both surged more than 2% to lead the gains. In Hong Kong markets, tech giants climbed 1.5%.
Energy shares rose 1.2%, as oil prices rose to their highest level in 10 months following China’s latest measures to boost its recovery.
China has in recent months introduced a slew of policy measures to boost market sentiment, but they have failed to drive a sustained rally in the stock market.
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Some analysts say the RRR cut is still not enough to revive growth and investor confidence, pointing to the mild 0.1% gain in the mainland stock benchmark on Friday.
“Although these easing measures are very welcome, they are definitely not enough to turn things fully around … the real problem is the lack of effective credit demand instead of lack of credit supply,” Nomura’s Lu said.
Goldman Sachs expects further policy easing, including another 25 bps RRR cut and a 10 bps policy interest rate cut in the fourth quarter, as well as further property policy easing such as relaxations of home purchase restrictions and downpayment ratio cuts in large cities.
A fund manager survey by the Bank of America earlier this week showed investors believe Chinese real estate is the most likely source of a global systemic credit event and are at their most pessimistic on China growth prospects in over a year.
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