Chinese shares finished higher on Wednesday after China’s central bank boosted short-term funding to ease worries over tightening liquidity amid a faltering recovery, but losses in financial, tech and real estate sectors capped gins.
At the close, the Shanghai Composite index was up 0.74% at 3,540.38.
The blue-chip CSI300 index was up 0.2%, turning around from a small dip at midday. It was led by consumer staples firms, which rose 1.91%.
China’s central bank offered 50 billion yuan ($7.7bn) through seven-day reverse repos into the banking system, bigger than daily injections in recent months, in what traders saw as a bid to support liquidity and lift market sentiment.
Weakening Chinese economic data has boosted analysts’ expectations that policymakers will announce more easing measures to boost activity, while the central bank chief also pledged to stabilise the supply of credit in a meeting on Monday.
In a separate statement posted on late Tuesday, the PBOC said it would auction another 70bn yuan worth of one-month cash deposits on Friday.
Primary interbank money rates eased after hitting multi-month highs earlier this week, caused by mounting investor concerns over accelerating local government bond supply and higher month-end cash demand.
Foreign inflows
Foreign investors helped lift A-shares, with Refinitiv data indicating inflows of more than 7.5bn yuan on the day through the Northbound leg of the Stock Connect programme.
But underscoring continued financial risks in the real estate sector that some investors worry could spread, a supplier to debt-laden developer China Evergrande Group said Evergrande had failed to pay some overdue bills.
The real estate index lost 3.67% and the financial sector sub-index slipped 1.37%. The CSI Info Tech index fell 0.74%.
The smaller Shenzhen index ended up 0.39% and the start-up board ChiNext Composite index was 0.54% higher.
Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.23%, while Japan’s Nikkei index closed down 0.03%.
At 0702 GMT, the yuan was quoted at 6.4774 per US dollar, 0.11% weaker than the previous close of 6.4705.
So far this year, the Shanghai stock index is up 1.9% and the CSI300 has fallen 6%, while China’s H-share index listed in Hong Kong is down 15.8%. Shanghai stocks have risen 4.2% this month.
As for the Fed, traders are awaiting clues from its Jackson Hole Symposium later this week on when and how it will begin tapering stimulus.
“The policy divergence between the PBOC and Fed is clear, and this should limit any RMB strengthening expectations in the near term,” Terence Wu, FX strategist at OCBC, said. “The essentially leaves the USD-CNH still locked in within the 6.4500 to 6.5000 range.”
“We do not expect any major new guidance to be provided by Fed Chair Powell at Jackson Hole, as the Fed continues to watch the recent spread of the Delta variant across the US,” said Mohammed Kazmi, Macro Strategist at Union Bancaire Privée.
The United States could get Covid-19 under control by early next year if vaccinations ramp up, Dr Anthony Fauci, the nation’s top infectious disease expert, said on Tuesday.
• Reuters and Jim Pollard
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