Chinese stocks head for second weekly loss after policy lending rate is left untouched

  • Traders were disappointed after China left the one-year rate on the medium-term lending facility unchanged
  • Industrial and raw-material stocks were among the worst-performing industry groups, retreating more than 2 per cent

Chinese stocks are headed for a second straight weekly loss as investors were disappointed after the central bank unexpectedly left a policy lending rate unchanged, tempering optimism about an immediate loosening of monetary policy signalled by the premier.

The Shanghai Composite Index eased 0.6 per cent to 3,205.55 at the trading break on Friday, on track for a 1.4 per cent loss for the week. Hong Kong’s markets are closed through Monday for public holidays.

Industrial and raw-material stocks, which are more sensitive to the economic cycle, were among the worst-performing industry groups, retreating more than 2 per cent.

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Traders were disappointed after the People’s Bank of China kept unchanged the one-year rate on the medium-term lending facility, a funding tool for commercial lenders. The central bank also refrained from injecting liquidity into the financial system through open-market operations.

That came even after speculation had mounted over further monetary policy loosening, with Premier Li Keqiang strongly hinting at a cut in the reserve requirement ratio (RRR) to stem a slowdown in growth in a cabinet meeting this week.

“Given global inflation, chances of a massive loosening of monetary policies in the short term are low,” said Fei Xiaoping, an analyst at Dongguan Securities. “Even if there’s a cut in the RRR, it will be in the form of a targeted one.”

Investors are also eagerly awaiting China’s first-quarter economic data, due on Monday, given the extended lockdown in Shanghai that has already suspended production at electric-vehicle makers from Tesla to Nio.

Growth in the world’s second-largest economy probably reached 4.3 per cent in the span, according to a survey of economists compiled by Bloomberg, putting in jeopardy the annual target of 5.5 per cent.

Xpeng‘s chief executive officer He Xiaopeng warned that China’s car production could come to a halt in May unless the supply chain in Shanghai and its neighbouring region resumes, the latest sign of how China’s zero tolerance of Covid-19 has upended even the nation’s most upbeat industry.

While daily new infections fell slightly to 23,072 on Thursday, symptomatic cases rose by 20 per cent to a record 3,200, according to the government data. That has brought the tally to more than 303,000 since March 1, with nine critically ill now. Vice-Premier Sun Chunlan has been in the city over the past two weeks to oversee the campaign to battle the pandemic, stressing that Shanghai should unwaveringly enact the zero-Covid policy.

Among the biggest decliners, Contemporary Amperex Technology, the supplier of lithium-ion batteries to Tesla, tumbled 5.4 per cent to 435 yuan in Shenzhen, heading for the lowest close since June. Kweichow Moutai slipped 0.1 per cent to 1,806.77 yuan in Shanghai.

Guangdong Anda Automation Solutions, a car-parts maker, dropped 22 per cent to 47.15 yuan on the first day of trading in Shanghai.

Author: Zhang Shidong, SCMP

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