Beijing has announced the PBOC will cut the bank’s Reserve Requirement Ratio by 0.5% effective the 5th of February, the announcement sent stocks in Hong Kong surging up over 3.5% in rapid fashion, its largest daily gain in four months. The move is aimed at stimulating the economy by relaxing lending restrictions as the banks aren’t required to hold as much cash in reserve, a significant move which frees up about $US140bn. As we know, Beijing is also likely to put “pressure” on the banks to put this money to work, which should help their goal of kick-starting the economy.
Goldman Sachs is looking for China to lower interest rates by the end of the quarter after yesterday’s surprise cut in the reserve requirement, as the world’s second-largest economy has made its intentions clear at the start of 2024. Chinese regulators also offered more financial support for struggling developers by broadening their access to some commercial loans in an attempt to support its ailing property market and, importantly, lift consumer confidence in a country that is arguably more obsessed with property as an investment than ourselves.
- We continue to believe that Beijing will release further targeted stimulatory measures through 2024 to support their struggling economy, a net positive for our Resources Sector.
