China stocks rise as investors cheer monetary easing

Shares of China Evergrande Group jumped more than 7% in morning trade and was up 0.6% at the noon break, as the debt-laden developer moves closer toward a restructuring that has loomed for months over global markets and the world's second-largest economy. The market is watching if the real estate giant, grappling with more than $300 billion in liabilities and at risk of becoming China's biggest ever default, has made coupon payments of $82.5 million with a 30-day grace period coming to an end.


Reuters | Shanghai | Updated: 07-12-2021 10:44 IST | Created: 07-12-2021 10:39 IST
China stocks rise as investors cheer monetary easing
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China stocks rose on Tuesday after the central bank cut the amount of cash banks must hold in reserve, while investors cautiously watched if Evergrande would default as the world's most indebted developer inches closer to a debt restructuring.

The CSI300 index rose 0.5%, to 4,917.47 points at the end of the morning session, while the Shanghai Composite Index gained 0.1%, to 3,593.73 points. The Hang Seng index added 1.5%, to 23,690.01 points. The Hong Kong China Enterprises Index gained 1.6%, to 8,405.99.

Risk appetite got a lift after the People's Bank of China cut banks' reserve requirement ratio (RRR) on Monday, its second such move this year, freeing up 1.2 trillion yuan ($188 billion) in long-term liquidity to bolster slowing economic growth. "The RRR cut is likely to boost investment sentiment and support valuation in the stock market," said Chaoping Zhu, Global Market Strategist at J.P. Morgan Asset Management.

"However, investors should also bear in mind that the long-term reform goals, such as common prosperity, deleveraging and decarbonisation, remain on the table and may continue to weigh on the investment landscape in China," Zhu said. On property policies, a Politburo meeting memo on Monday dropped their previous stance of "housing is for living, not for speculation," and said it would support the private housing market to better meet reasonable needs.

Nomura analysts said investors should avoid over-interpreting the memo, but added that it could be a positive piece of news as it might correct many of these market-distorting curbs. Shares of China Evergrande Group jumped more than 7% in morning trade and was up 0.6% at the noon break, as the debt-laden developer moves closer toward a restructuring that has loomed for months over global markets and the world's second-largest economy.

The market is watching if the real estate giant, grappling with more than $300 billion in liabilities and at risk of becoming China's biggest ever default, has made coupon payments of $82.5 million with a 30-day grace period coming to an end. A formal default would trigger a wave of cross defaults that would ripple through the property sector and beyond.

The PBOC will also cut the rates on its relending facility by 25 basis points to support the rural sector and small firms, the state-run Securities Times reported on Tuesday. But the chance of a cut in the benchmark lending rate remains low in the near term, analysts said. In mainland markets, real estate developers surged 2.5% while tourism stocks jumped 3%.

However, semiconductor firms and new energy shares retreated 2.4%, respectively, and analysts said some investors are taking profits on their high valuations. The chip sector has risen nearly 30% this year, while new energy is up more than 50%. In Hong Kong, tech giants rebounded 2.2%, tracking gains in Wall Street, after the sector tumbled on ride-hailing giant Didi's delisting from New York.

E-commerce giant Alibaba Group bounced back from its record low and soared 9.1%, while Tencent Holdings and Meituan added 1.9% and 2.3%, respectively.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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