AGL 40.00 Decreased By ▼ -0.01 (-0.02%)
AIRLINK 127.00 Decreased By ▼ -0.99 (-0.77%)
BOP 6.68 Increased By ▲ 0.08 (1.21%)
CNERGY 4.49 Decreased By ▼ -0.11 (-2.39%)
DCL 8.60 Increased By ▲ 0.12 (1.42%)
DFML 41.30 Decreased By ▼ -0.18 (-0.43%)
DGKC 86.71 Increased By ▲ 0.13 (0.15%)
FCCL 32.16 Increased By ▲ 0.02 (0.06%)
FFBL 64.70 Decreased By ▼ -0.72 (-1.1%)
FFL 10.29 Increased By ▲ 0.04 (0.39%)
HUBC 109.51 Decreased By ▼ -0.98 (-0.89%)
HUMNL 14.90 Increased By ▲ 0.15 (1.02%)
KEL 5.05 Decreased By ▼ -0.08 (-1.56%)
KOSM 7.40 Increased By ▲ 0.28 (3.93%)
MLCF 41.39 Decreased By ▼ -0.26 (-0.62%)
NBP 60.60 Increased By ▲ 0.51 (0.85%)
OGDC 190.00 Decreased By ▼ -4.69 (-2.41%)
PAEL 27.81 Decreased By ▼ -0.14 (-0.5%)
PIBTL 7.75 Decreased By ▼ -0.25 (-3.13%)
PPL 149.75 Decreased By ▼ -1.42 (-0.94%)
PRL 26.73 Decreased By ▼ -0.15 (-0.56%)
PTC 16.18 Increased By ▲ 0.18 (1.13%)
SEARL 86.02 Increased By ▲ 7.82 (10%)
TELE 7.72 Increased By ▲ 0.33 (4.47%)
TOMCL 35.58 Decreased By ▼ -0.09 (-0.25%)
TPLP 8.14 Increased By ▲ 0.23 (2.91%)
TREET 16.51 Increased By ▲ 0.62 (3.9%)
TRG 53.35 Increased By ▲ 0.59 (1.12%)
UNITY 26.28 Decreased By ▼ -0.27 (-1.02%)
WTL 1.26 Decreased By ▼ -0.01 (-0.79%)
BR100 9,889 Decreased By -31.1 (-0.31%)
BR30 30,611 Decreased By -140.9 (-0.46%)
KSE100 93,355 Increased By 130.9 (0.14%)
KSE30 28,931 Increased By 46 (0.16%)

China's central bank acted decisively on Monday to prop up the country's slowing economy by cutting the cost of bank loans for the first time since February 2002. Against a background of acute stress in global financial markets, the People's Bank of China also lowered the reserve requirement for all banks, except the five largest and the Postal Savings Bank, by 1 percentage point.
Both cuts were unexpected. It is the first time that the central bank has lowered the proportion of deposits that lenders must hold in reserve since November 1999. "We all knew that there would be monetary policy relaxation in China, but we didn't expect the move would be so quick," said Gao Huiqing, an economist with the State Information Centre, a government think-tank in Beijing.
The 0.27 percentage point cut in benchmark lending rates lowers the cost of one-year bank loans to 7.20 percent from Tuesday, the PBOC said on its website, www.pbc.gov.cn. China adjusts interest rates in increments that are divisible by nine because it makes interest calculations easier for lenders, which work off a 360-day banking year.
With inflation still uncomfortably high, the central bank kept benchmark savings rates unchanged at 4.14 percent for one-year certificates of deposit, pointing to narrower lending margins for the vast majority of banks. Gao Linzhi, a strategist at Great Wall Securities in Shenzhen, said the measures should help to put a floor under the Shanghai stock exchange's main index at 2,000 points.
The index, which closed on Friday at 2,079.67, has lost 65 percent since hitting a record high last October. The market was closed on Monday for a public holiday. "This is obviously bad for the banking sector because of the shrinking interest rate spread, but it's good for the real estate sector and other industries which depend heavily on borrowing," he said.
The abrupt easing of policy came shortly after US investment bank Lehman Brothers filed for bankruptcy and Merrill Lynch agreed to be bought by Bank of America. But a reference to the global credit crisis was conspicuous by its absence in the PBOC's statement.
Instead, the central bank said it was acting to "maintain the stable, fast and continuous development of the national economy", the world's fourth-largest. "It shows that the Chinese leadership has a very clear idea of where the economy is heading - China's economy is moving into a period of adjustment," said Gao at the State Information Centre.

Copyright Reuters, 2008

Comments

Comments are closed.