China Stocks Slide as PBOC Resists Pressure to Drop Rates

China’s central bank kept its policy rates unchanged despite the hopes of investors worried about the economic cost of China’s zero-Covid policy

 

China stocks slipped on Friday after the central bank kept its policy rates unchanged, even as the economy grapples with its worst Covid outbreak in two years.

China’s central bank kept borrowing costs of its medium-term policy loan unchanged for the third straight month, despite Beijing calling for more monetary stimulus to cushion an economic slowdown.

Investors are increasingly worried about the economic cost of China’s zero-Covid policy, which has put the financial hub of Shanghai, and roughly a dozen other cities under full or partial lockdowns, disrupting economic activity.

 

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China’s Covid curbs are clogging highways and ports, stranding workers and shutting countless factories – disruptions that are rippling through global supply chains.

“The People’s Bank of China (PBOC) forwent the opportunity to lower its policy rates today,” wrote Julian Evans-Pritchard, senior China economist at Capital Economics. “That’s somewhat surprising given the sharp economic downturn and recent calls from China’s leadership for monetary support.

“It underscores the reluctance of the central bank to aggressively ease policy. But we think it will have little choice but to do more before long.”

The blue-chip CSI300 index fell 0.1% to 4,188.75, while the benchmark Shanghai Composite Index shed 0.45%, or 14.40 points, to 3,211.24.

The Shenzhen Composite Index on China’s second exchange slipped 1.01%, or 20.61 points, to 2,013.87. Hong Kong and Mumbai markets were closed for a public holiday.

 

Shanghai STAR market drops

Shanghai’s tech-focused STAR market fell 0.2%, while Shenzhen’s start-up board ChiNext dropped 1%. Automobile shares dropped 0.8% but bucking the trend, real estate and

Infrastructure stocks rose, amid signs that China is loosening real estate curbs, and boosting infrastructure investment to invigorate its struggling economy.

Healthcare stocks rose 1.5%, as investors bet that the sector will benefit from the pandemic as drugmakers scramble to develop anti-Covid medicines.

Tokyo stocks closed lower as investors sold chip-related stocks, after losses on Wall Street over concerns about higher interest rates.

The benchmark Nikkei 225 index slid 0.29%, or 78.81 points, to end at 27,093.19, while the broader Topix index lost 0.62%, or 11.74 points, to 1,896.31.

 

Key figures around 0745 GMT

Tokyo – Nikkei 225: DOWN 0.3% at 27,093.19 (close)

Shanghai – Composite: DOWN 0.5% at 3,211.24 (close)

Hong Kong – Hang Seng Index: Closed

Brent North Sea crude > UP 2.7% at $111.70 per barrel at 2100 GMT Thursday

West Texas Intermediate > UP 2.6% at $106.95 per barrel at 2100 GMT Thursday

New York – Dow > DOWN 0.3% at 34,451.23 (Thursday close)

London – FTSE 100 > UP 0.5% at 7,616.38 (Thursday close)

 

  • Reuters with additional editing by Sean O’Meara

 

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Sean OMeara

Sean O’Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.