Mon Sep 23 15:14:51 UTC 2024: ## Asian Equities Mixed as China’s PBOC Hints at More Rate Cuts

**Hong Kong (October 2, 2023):** Asian equities were largely higher on Monday, with the People’s Bank of China (PBOC) hinting at further interest rate cuts as the country grapples with weak demand.

The PBOC lowered the 14-day reverse repo rate, bringing it in line with the 7-day reverse repo rate cut implemented on July 22nd. This move, coupled with an upcoming press conference by PBOC Governor Pan Gongsheng, fueled expectations of more rate cuts including the 7-day reverse repo rate, bank reserve requirement ratio, and/or medium-term lending facility rate.

While markets welcomed the prospect of rate cuts, it remains to be seen if the move will effectively address China’s demand problem.

**Hong Kong:** The Hang Seng Index dipped slightly, while the Hang Seng Tech Index saw a more pronounced decline, attributed to profit-taking on recent growth stock outperformers. Despite this, Mainland investors continued buying Hong Kong-listed growth stocks via Southbound Stock Connect, suggesting a positive outlook.

**Mainland China:** The Shanghai Composite Index edged up, led by mega-cap value stocks and sectors like financials and energy. Growth and small-cap stocks struggled, while EV stocks were also down, fueled by concerns about a potential US ban on Chinese EV software.

**Key Developments:**

* **PBOC rate cuts:** The PBOC’s moves indicate a commitment to stimulate the economy by lowering borrowing costs.
* **Hong Kong growth stock performance:** Despite index rebalances and negative Western media coverage, Hong Kong growth stocks held their ground, pointing to a strong buying interest.
* **Mainland investor activity:** Mainland investors continued buying Hong Kong-listed growth stocks, signaling a confidence in the long-term potential of these companies.
* **Government stimulus measures:** The NDRC announced new policies aimed at promoting equipment upgrades and consumer spending, but the impact remains to be seen.

Overall, the Asian equity market is showing signs of mixed sentiment. While China’s rate cut announcement brought optimism, the future direction remains uncertain. Investors will be closely watching the PBOC’s press conference on Tuesday for further clues about the country’s economic policy and potential impact on regional markets.

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