Chinese Banks Rally in New York as PBOC Seen Lending Cash
Bloomberg News
Chinese banks rallied in New York trading as Sina.com said the central bank is providing the biggest lenders with 500 billion yuan ($81 billion) of financing to bolster loan growth and shore up the economy.
Industrial and Commercial Bank of China Ltd., the world's largest lender by assets, and smaller peer China Construction Bank Corp. (939) climbed at least 1.3 percent, advancing for the first time in seven days in over-the-counter trading in New York. The Bloomberg China-US Equity Index gained 0.3 percent after erasing an earlier loss of as much as 1.1 percent. Ltd. advanced 4.8 percent after Deutsche Bank AG recommended buying the sports lottery website.
China's central bank yesterday began providing the five biggest banks 100 billion yuan each through three-month lending facilities, the news website reported, citing a banking analyst at Guotai Junan Securities Co. A phone call to the central bank's press office in Beijing went unanswered after normal business hours. The report came after the Shanghai Composite Index (HSCEI) tumbled the most since March as data showed foreign direct investment fell to a four-year low, the latest sign that growth is slowing in the world's second-biggest economy.
'This is a signal that Chinese policy makers do care about the weakness in economic data and they're willing to provide more stimulus,' Michael Wang, an emerging-markets strategist in London at Amiya Capital LLP, said by phone. 'The liquidity injection into the biggest banks is equivalent to a cut in their reserve ratio requirement.'
Slowing Growth
Industrial and Commercial Bank of China ( IDCBY:US)'s American depositary receipts rose 1.3 percent to $13.40. ADRs of climbed 1.9 percent to $14.96. Shares of the Beijing-based lenders fell in Hong Kong yesterday before the Sina.com report. 500.com advanced to $31.32 in New York, rallying the most since July 22.
China's factory output rose 6.9 percent last month, the least since the 2008 global financial crisis, while fixed-asset investment and retail sales missed estimates, official data showed over the weekend. Those readings followed a second straight drop in imports and a 40 percent decline in the broadest measure of new credit for August, as well as indicators showing a manufacturing pullback.
The liquidity injection will have the same effect as a 50 basis-point reduction to banks' required reserve ratio if investors expect the lending facility to be rolled over, Ting Lu, Bank of America Corp. economist wrote in a research note yesterday.
'Big Easing'
China should refrain from cutting interest rates and instead use other monetary policy tools to stimulate growth as the economy will probably face 'heavy' pressure in the fourth quarter, the Shanghai Securities News reported Sept. 15, citing Chen Yulu, an academic adviser to the central bank.
The , the largest Chinese exchange-traded fund in the U.S., rallied 0.6 percent to $40.63, halting a six-day retreat that was the longest in two years. The Standard & Poor's 500 Index gained 0.8 percent, as rising oil prices spurred a rally in energy shares.
'We just learned that the PBOC is quite happy joining the big easing game,' said Benoit Anne, head of emerging market strategy at Societe Generale SA in London. 'This is a major signal for investor confidence.'
The European Central Bank cut its main refinancing rate to a record 0.05 percent on Sept. 4. Federal Reserve policy makers will maintain benchmark U.S. borrowing costs at a record low at their policy meeting that ends today, according to economists in a Bloomberg survey.
The Shanghai Composite plunged 1.8 percent to 2,296.56. The Hang Seng China Enterprises Index dropped 1.1 percent to 10,718.01.
(An earlier version of this story corrected the first paragraph to show the government is boosting liquidity.)
To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net
To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net Richard Richtmyer
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