China's central bank RRR cut to prop up pressured bourses

Source:Global Times Published: 2018/10/7 18:03:39

Chinese experts optimistic about stock market performance

Chinese stock markets will probably be led by fluctuations after the National Day holidays, mainly pressured by external market decline, a stock analyst predicted on Sunday.

But he said the central bank's recent decision to cut reserve requirement ratios (RRR), would help stabilize the two bourses.

The Shanghai Composite Index stood at 2,821.35 points, up by 1.06 percent, on September 28, the last trading day before the National Day, while the Shenzhen Component Index reached 8,401 points on that day, up by 0.8 percent.

Li Daxiao, chief economist at Shenzhen-based Yingda Securities, told the Global Times on Sunday that the plunge in external stock markets would restrict the rebounding level of mainland stock markets after the weeklong National Day holidays.

The US stock markets fell during China's National Day holidays, with the Dow Jones Industrial Average losing about 180 points on Friday, or 0.68 percent, after edging down by 0.75 percent on Thursday, while NASDAQ-listed shares plunged by 3.21 percent at the close on Friday.

"Such falls in overseas markets will exert great pressure on the A-share's performance in general," Li said.

But experts stressed that positive news is also accumulating that can help prop up the markets. For example, the recently-announced RRR reduction can help stimulate market confidence.

The People's Bank of China, China's central bank, announced on Sunday that it would cut RRR by one percentage point for major commercial banks, joint-stock commercial banks, city commercial banks, non-county rural commercial banks as well as overseas-invested banks starting from October 15.

Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, said that A-shares' values have dropped to a very low level resulting from the two bourses' year-long plunge, meaning that the A shares have reached a point where they have good investment values.

"Now almost all the negative factors for the A shares have been reflected in the share prices already, so I estimate the markets won't have much space for a further slump," Yang told the Global Times on Sunday.

The two bourses, pressured with a downward trend for quite some time, have showed a rebounding trend in late September. The Shanghai market bounced from about 2,700 points on September 18, while the Shenzhen market rebounded from a periodic bottom of 8,133 points, also on September 18.

A Shanghai-based investor surnamed Zhang said that he has felt the "wind of the bullish market" blowing.

"I am not sure exactly when I will dive in, but I guess next year there will be significant positive changes on the A-share markets," he told the Global Times over the last week.

Newspaper headline: Central Bank RRR cut props up pressured bourses

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