Templeton Emerging Markets Group executive chairman Mark Mobius yesterday said he has confidence in the People’s Bank of China (PBOC) and is keeping his overweight position in the nation’s equities after a five-day tumble.
“We should be confident about what the [Chinese] government is doing and they are cleaning up the system,” Mobius said in a telephone interview. “We are looking to add to Chinese exposure if the price is right. If the price comes down substantially, we would.”
The Shanghai Composite Index tumbled 9.3 percent in the past five days, sending valuations to the lowest level on record, as interbank borrowing costs reached all-time highs.
The gauge slipped 0.2 percent yesterday, rebounding from an earlier 5.8 percent plunge amid speculation that Beijing will take steps to support financial markets. Liquidity risks are controllable and seasonal forces affecting interest rates will fade, a central bank official said.
China’s Cabinet last week said finance companies must do more to support economic transformation and reduce risks after administrative measures to crack down on property prices and local government investments were bypassed by so-called shadow banking.
A gauge of financial shares in the CSI 300 Index slumped 12 percent in the past five days, amid concern that higher interbank borrowing costs will hurt some lenders’ earnings.
The seven-day repurchase rate, a gauge of liquidity in the interbank market, rose 68 basis points yesterday to 8 percent, a fixing by the National Interbank Funding Center showed. That is more than double this year’s average of 3.78 percent.
The central bank will closely monitor the money-market rate going forward and keep it at reasonable levels, Ling Tao (淩濤), deputy director of the bank’s Shanghai branch, said yesterday.
China’s major banks “are not going to have a problem,” Mobius said.