HONG KONG — Mainland Chinese stocks edged down slightly on Wednesday while many other regional markets climbed, as investors reacted to moves by China’s central bank late Tuesday to assuage concerns about a lingering credit squeeze in the country’s financial system.
The Shanghai composite index, which had plunged 5.3 percent on Monday and gyrated wildly on Tuesday, was down 1.4 percent by noon on Wednesday. Interbank lending rates, which determine how costly it is for banks to borrow money from one another, continued to retreat from last week’s record highs, but remained well above where they have been over the past year.
Late on Tuesday, the People’s Bank of China, which had mostly stood on the sidelines in recent weeks as China’s cash crunch deepened, issued a statement aimed at soothing market nerves but still maintaining pressure on commercial banks to take a more prudent approach to lending.
In its statement, the P.B.O.C. said some larger lenders had already started playing a stabilizing role by injecting capital into the market. The central bank cautioned against risky lending practices but pledged to support banks facing cash shortfalls, adding that it would offset “short-term abnormal volatility, stabilize market expectations and maintain stability in monetary markets.”
Analysts welcomed the change in the central bank’s tone, saying that it could help ease the tumult in China’s financial system and address concerns that the liquidity situation could further impact the country’s slowing economic growth.
The central bank “has fine-tuned its tone to ease the liquidity tightness,” China economists at ANZ in Hong Kong wrote in a research note Tuesday. “The market interest rates are likely to decline significantly in the remaining week, which will help stabilize the market and the real economy.”
Analysts at Citibank noted in a research report that “there has been criticism that P.B.O.C. underestimated the impact of its inaction and artificially created financial risks.” The central bank’s statement on Tuesday “may reduce the chance of a recurrence of the recent episode.”
Markets in much of the rest of the Asia-Pacific region responded favorably to the central bank’s comments, as well as positive new data on the U.S. housing market that was released Tuesday.
In Hong Kong, the Hang Seng Index had climbed 1 percent by midday. The Straits Times Index in Singapore had advanced 0.6 percent, while in Australia the S.P./ASX 200 index had risen 1.4 percent.
Article source: http://www.nytimes.com/2013/06/27/business/global/asian-markets-react-to-china-central-bank.html?partner=rss&emc=rss
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