Home ›› 19 Apr 2022 ›› Stock
China stocks closed down on Monday, with investors disappointed about a smaller-than-expected cut in the reserve requirement ratio (RRR) that many felt might not be enough to reverse a sharp economic slowdown.
Unexpectedly strong gross domestic product data for the first quarter of 2022 failed to lift the market, with analysts saying the key question was whether authorities would make adjustments to the tough anti-Covid-19 measures.
The blue-chip CSI300 index fell 0.5 per cent to 4,166.38, while the Shanghai Composite Index lost 0.5 per cent to 3,195.52 points. The Hong Kong market is closed for a holiday.
The People's Bank of China (PBOC) said on Friday it would cut the reserve requirement for all banks by 25 basis points (bps), releasing about 530 billion yuan ($83.25 billion) in long-term liquidity to cushion a slowdown.
"This is less than what the market expected, as the PBOC RRR cut has always been 50bps or higher in the past," said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
Analysts said the small cut may reflect concern by the Chinese central bank over inflation and US monetary tightening, making further interest rate cuts less likely.
China's gross domestic product (GDP) beat analysts' expectations with a 4.8 per cent increase in the first quarter from a year earlier, while data on March activity showed weakness in consumption, property and exports affected by Covid-19 curbs.
"We expect a stronger macro policy response in the second quarter to shore up growth, but the impact will be limited in the context of restricted mobility," said Tommy Wu, lead China economist at Oxford Economics.
Heightened global risks from the war in Ukraine, and the Covid lockdowns in China and a weak property market have roiled its financial markets, with authorities vowing to stabilise them and support the economy.
Real estate developers tumbled 4.3 per cent, while financial and energy stocks closed down 3 per cent each.
As a growing number of business leaders and analysts warn that a strict zero-COVID policy is triggering economic disruptions, China said on Friday it would help hundreds of companies in key sectors to resume production in locked-down Shanghai.
Sectors that will resume work include semiconductors, automobiles and the medical industry, the Ministry of Industry and Information Technology said.
Shares in semiconductors and automobiles climbed 3.9 per cent and 2.3 per cent, respectively, while healthcare firms edged down 0.4 per cent, with traders closely watching whether the resumption will be effective.
China's supply chains must be stabilised amid COVID-19 outbreaks, and authorities must ensure traffic permits for drivers are recognised across the country, the official Xinhua news agency quoted Vice Premier Liu He as saying.
