People’s Bank of China lowered its one-year loan prime rate to 3.1% and trimmed the five-year LPR to 3.6%, as anticipated by market watchers. This move, at the upper end of the 20-25 basis point range suggested by Governor Pan Gongsheng during a Beijing forum last Friday, impacts a broad spectrum of loans in China. The one-year LPR directly influences corporate and household loans, while the five-year LPR serves as a benchmark for mortgage rates.
While this rate cut signifies some level of monetary stimulus, analysts continue to stress that China’s core issue is not the supply of credit, but rather a lack of demand. Many argue that without substantial fiscal stimulus, the impact of these rate adjustments will remain muted.
Hong Kong market barely reacted to the rate cut news. HSI continues to trade in a narrow range between 20k and 21k. However, technically, HSI’s up trend from 14794.16 would remain intact as long as 38.2% retracement of 14794.16 to 23241.74 at 20014.76 holds. Break of 21622.65 resistance will indicate that the correction is over, and bring retest of 23241.74 high.
