Chinese stocks erased earlier gains and closed 1 percent lower yesterday, after an injection of more money into the system by the central bank failed to impress investors who are worried about an ongoing crackdown on high-leverage trading.
The yuan and money rates dipped after the People’s Bank of China (PBOC) cut banks’ reserve requirement ratios by 50 basis points, a widely expected stimulus move to support the world’s second-biggest economy.
“The cut was largely priced into the stock market [already], but it has reconfirmed an important message to investors that China’s monetary cycle has firmly shifted to the loosening camp,” Fidelity Worldwide Investment portfolio manager Jing Ning (寧靜) wrote in a note to clients. “The next question is whether this is followed by a rate cut by the PBOC. We will not see the impact of last November’s rate decision on the economy until the end of this quarter.”
Weighed down by a cooling property market, industrial overcapacity and slowing investment, China’s economy grew at its slowest pace in 24 years last year and is expected to cool further to about 7 percent this year, even with additional stimulus.
China’s factory sector unexpectedly shrank for the first time in nearly two-and-a-half-years last month and firms see more gloom ahead, an official survey showed on Sunday, raising expectations that policymakers would have to take more action to forestall a sharper slowdown.
In Shanghai, the CSI300 Index closed down 1 percent after surging 2.5 percent at the open, while the Shanghai Composite Index ended down 1.2 percent after opening up 2.4 percent.
Blue chips fell across the board, but the ChiNext Composite Index ended up 0.9 percent.
“Small and mid-caps were less impacted by margin trading investigations that were targeted at blue chips and we’re seeing that reflected in the way various sectors of the market are performing today,” Datong Securities Dalian-based analyst Li Zheming (李哲明) said. “If these easing policies continue, we may see a more positive reaction from the market than we did today.”
Shares have been under pressure since last week on news that the stock regulator is probing margin trades in the latest efforts to rein in speculation in the market, which has gained about 40 percent over the past few months.
In the currency market, the yuan opened at 6.2560 per US dollar and was at 6.2516 in late afternoon trade, 44 pips away from the previous close.
As the economy cools, money has been flowing out of China, putting downward pressure on the currency and prompting large state-owned banks to step in to sell US dollars to ensure the yuan’s weakness does not trigger even larger outflows.
ANZ analysts believe the cut in the required rate of return would inject about 600 billion yuan (US$95.96 billion) into the banking system, though questions remain over whether the money would fund real economic activity or be channeled into speculation like bigger bets on the stock market.
“We maintain our view that the authorities will not depreciate the currency, as that would risk even more capital outflows, which could prove to be destabilising,” ANZ strategists wrote in a daily note.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has appointed Rose Castanares, executive vice president of TSMC Arizona, as president of the subsidiary, which is responsible for carrying out massive investments by the Taiwanese tech giant in the US state, the company said in a statement yesterday. Castanares will succeed Brian Harrison as president of the Arizona subsidiary on Oct. 1 after the incumbent president steps down from the position with a transfer to the Arizona CEO office to serve as an advisor to TSMC Arizona’s chairman, the statement said. According to TSMC, Harrison is scheduled to retire on Dec. 31. Castanares joined TSMC in
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
FACTORY SHIFT: While Taiwan produces most of the world’s AI servers, firms are under pressure to move manufacturing amid geopolitical tensions Lenovo Group Ltd (聯想) started building artificial intelligence (AI) servers in India’s south, the latest boon for the rapidly growing country’s push to become a high-tech powerhouse. The company yesterday said it has started making the large, powerful computers in Pondicherry, southeastern India, moving beyond products such as laptops and smartphones. The Chinese company would also build out its facilities in the Bangalore region, including a research lab with a focus on AI. Lenovo’s plans mark another win for Indian Prime Minister Narendra Modi, who tries to attract more technology investment into the country. While India’s tense relationship with China has suffered setbacks