Asia: Chinese stocks rally as PBOC pledges fresh stimulus

Chinese equity markets rallied on Monday, buoyed by the People’s Bank of China’s pledge to introduce fresh stimulus measures to boost the country’s economy.

Over the weekend, China’s central bank announced it would expand a pilot programme aimed at increasing bank’s lending abilities, by allowing banks to pledge a number of assets to borrow from the central bank.

The PBOC could be forced into implementing new stimulus measures as soon as Tuesday, when a report on Chinese exports is released.

“We also expect the contractions in China’s exports and imports to have widened, which could weigh on commodity currencies that have recently reversed substantial losses,” said analysts at Barclays.

The Shanghai Composite Index rallied 3.28%, while the Hang Seng rose 1.21%, driven higher by news that China Reinsurance group plans to raise $2bn in an initial public offering in Hong Kong, which would represent the biggest listing in the city since June.

“Given the sharp sell down in the market over the last few months, this re-energizes the equity markets in Hong Kong,” said IG’s Bernard Aw.

Meanwhile, shares of Glencore were suspended from trading in Hong Kong, after the mining giant said it was considering selling two of its copper mines as it seeks to regain investors’ confidence after a couple of turbulent weeks.

Elsewhere, Japanese markets were closed for a bank holiday, while South Korea’s Kospi climbed 0.1% and Australia’s S&P/ASX 200 fell 0.89%.

On the currencies front, the yuan gained 0.36% against the dollar, registering a seventh consecutive day of gains against the greenback.

“Although the FOMC minutes once again repeated the Federal Reserve’s intentions towards interest rates in 2015, the minutes continued to highlight that there is still complete confusion and an ongoing lack of clarity on the probable timing of a US interest rate rise,” said FXTM chief market analyst Jameel Ahmad.

“This exposed the dollar to further pressures against its trading partners.”