China stocks rise on medium-term loan rates cut, more stimulus hopes

Data on Thursday showed China's economy stumbled in May, with industrial output and retail sales growth both missing forecasts, adding to expectations that Beijing will have to quickly ramp up stimulus to shore up a shaky pandemic recovery. The People's Bank of China (PBOC) said it lowered the rate on 237 billion yuan ($33.1 billion) of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points to 2.65%，in line with market expectations.

China's stock markets rose on Thursday, after the central bank cut the borrowing cost of its medium-term policy loans for the first time in 10 months to aid a shaky economic recovery.

China's benchmark CSI 300 Index added 0.5% by the midday recess, while Hong Kong's Hang Seng Index climbed 0.8%. Data on Thursday showed China's economy stumbled in May, with industrial output and retail sales growth both missing forecasts, adding to expectations that Beijing will have to quickly ramp up stimulus to shore up a shaky pandemic recovery.

The People's Bank of China (PBOC) said it lowered the rate on 237 billion yuan ($33.1 billion) of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points to 2.65%，in line with market expectations. "Weak activity data means that this is probably not the end of the stimulus," said Robert Carnell, regional head of research, Asia-Pacific at ING.

Investors were also encouraged by the U.S. Federal Reserve hitting the pause button on interest rate hikes overnight, as Asia-Pacific shares outside Japan gained slightly on the news. Investors are closely watching developments on the geopolitical front. U.S. Secretary of State Antony Blinken is expected to visit Beijing next week amid escalated tensions between two countries, although the U.S. played down expectations of any breakthrough from the trip.

Foreign investors resumed purchasing Chinese equities on Thursday via the Stock Connect after four days of net sell-offs. They bought a net 4 billion yuan ($557.76 million) so far on the day. Stocks in consumer discretionary, new energy and automobiles climbed more than 2%.

In the Hong Kong market, mainland developers advanced 2.4% as data showed a slower rise in China's new home prices in May, raising the prospect of more easing steps. Hong Kong-listed tech giants were up 1.8%, with Meituan and Alibaba gaining 3.7% and 2.6%, respectively.

"Looking forward, the market hopes for more supportive policies to stimulate consumption. Another positive catalyst for Chinese equities would be increased communication between the US and China," said Jian Shi Cortesi, investment director of China equity funds at GAM Investments. ($1 = 7.1716 Chinese yuan)