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Asian stocks mostly fell on Monday, driven by a 0.8% decline in the Taiwan Taiex index.
The big theme of Monday
Everything revolves around China, again. The People's Bank of China announced on Sunday that it would reduce the amount of reserves that banks are required to keep from the central bank, which will release more than $ 100 billion to commercial banks to boost lending and restructure the bank. debt.
What is happening
The news is hitting the yuan, which is sliding against the dollar and has erased its gain since the beginning of the year, according to Wind Info.
A dollar was recently bought 6.5301 yuan, which means that the Chinese currency lost 0.5% against the greenback that day. It has now slipped 0.3% for the year.
But the announcement of the central bank has not stimulated much Shanghai Composite. The index has hovered between slight gains and losses on Monday, up 0.2% in recent trading. This is not much compared to how he reacted after the central bank made similar cuts in the past.
The Shanghai Composite rose 0.8% on April 18, the day after China's central bank decided to reduce the amount of reserves held by commercial banks.
The index also added 0.8% on Oct. 9, the first trading day after the bank announced a targeted reduction in reserve requirements on Sept. 30. Chinese markets have been closed for local Golden Week holidays in between.
While the reduction in the ratio of bank reserve requirements should be positive for equities, the prospect of a trade war with the United States and the slowdown in the Chinese economy continue to weigh on the market. In the last sign of rising tensions, the President
Donald Trump
plans to prevent many Chinese companies from investing in US technology companies.
Market reaction
"It's not so easy to rebuild confidence in a market that has just recorded a new two-year low and that broke the key level of 3000 that he had been trying to defend for six years." month, "said Zhang Yanbing, Senior Analyst at Zheshang Securities.
The Shanghai index fell for five consecutive weeks until Friday, putting it on the edge of a bear market. Despite the increasingly attractive valuations of Chinese equities, "investor sentiment remains rather weak at the moment," Zhang said.
Another reason why news from the central bank has not lifted stocks? "The PBOC has not surprised anyone," said Raymond Yeung, chief economist for Greater China at the ANZ in Hong Kong, highlighting an opinion from the state's state council last week reporting this decision.
In the end, the last easing of central bank credit could continue to have a bigger impact on the yuan.
"The fact that the RRR reduction has outpaced Trump's additional tariffs on Chinese products shows that the authorities are now willing to let the yuan slide a bit more," said a Shanghai banker in a mid-sized Chinese bank. .
Somewhere else
Brent fell 1.8% on Monday, far outpacing the 0.3% drop in oil prices in the United States. Oil prices rallied Friday after some of the world's largest oil producers agreed to boost crude output less than many investors had expected.
-lingling Wei and Chao Deng contributed to this article.
Write to Saumya Vaishampayan at [email protected]
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