Asia: PBoC rhetoric boosts stocks but Chinese banks and ASX fall

Most Asian markets opened the week on an upbeat note after Chinese authorities gave the green light to a new round of stimulus measures.

On Friday, the People’s Bank of China cut its interest rates for the sixth time in the last 12 months, as Beijing looks to boost its flagging economy.

Chinese premier Li Keqiang had taken the sting out of the tail of rate cut by stating that the government will not defend its 7% growth target to the death, noted CMC Markets’ analyst Jasper Lawler.

“Operating within a reasonable range of growth as opposed to defending 7% would imply a willingness to allow growth to slip to perhaps as low as 6%, which would require less stimulus.”

The rate cut boosted the Shanghai Composite Index, which rose 0.50% on Monday and extended its gains from 26 August, when it hit its lowest point amid the summer selloff, to 15%.

However, Hong Kong’s Hang Seng Index reversed earlier gains to close down 0.15%, dragged lower by bank stocks, which were hurt from China’s decision to remove caps on deposit rates, in a bid to encourage competition and allow banks to set rates more freely.

Agricultural Bank of China lost 0.62%, while Bank of China Ltd slid 0.52%.

Meanwhile, Australia’s S&P/ASX 200 slid 0.07%, as investors remained concerned by the prospect of a slowdown in the Chinese economy, despite the new easing policies introduced by the PBoC.

“With economic momentum supposed to fall even further next year, I highly doubt that we have witnessed the conclusion of monetary easing from China,” said FXTM chief market Analyst, Jameel Ahmad.

“The PBoC will continue to do whatever it takes to defend growth targets and reinvigorate economic momentum, regardless of whether it comes through further interest rate cuts or gradual depreciation of the Chinese currency.”

Elsewhere, Japan’s Nikkei Stock Average and South Korea’s Kospi climbed 0.65% and 0.38% respectively.

On the currencies front, the Australian dollar surged 0.48% against its US counterpart, after surging as high as $0.729 in the wake of the PBoC’s announcement on Friday.

The yen gained 0.37% against the dollar, although the US currency reached its strongest level against the yen earlier in the session.