Asian stocks rally on China rate cut

Comment: China developers are expected to benefit from the cut. Lower bank borrowings, cheaper financing. Property stocks are expected to react positively. 

Asian stocks tracked gains in offshore markets, extending their rally on the back of another rate cut in China.

The People’s Bank of China (PBOC) lowered its benchmark interest rates by 25 basis points, alongside a half-percentage cut in the reserve requirement ratio (RRR), to jumpstart a slowing economy.

Friday’s moves marked the sixth time since November that the PBOC has cut interest rates and the fourth across-the-board reduction of the amount of deposits banks are required to hold in reserve.

“The estimated cash released from these policy changes is 600 to 700 billion yuan in liquidity (about $93.75 to $109.3 billion). Considering the inflation and industrial production [data] over the past quarter, this should be no surprise. In fact, the surprise is that it’s taken this long for the PBoC to pull the trigger,” IG’s market strategist Evan Lucas wrote in a note released early Monday.

“What might be missed by the headline reads is that the PBOC has abolished the deposit rate ceiling – this is a big step forward in liberalizing the interest rate market and shows China is very much committed to its goals of liberating the financial system,” he added, referring to the 25-basis-point cut in its one-year benchmark deposit rate.

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