SHANGHAI: China stocks closed 1 per cent lower, after an injection of more money into the system by the central bank failed to impress investors who are worried about an ongoing crackdown on high leverage trading.
China’s factory sector unexpectedly shrank for the first time in nearly 2-1/2 years in January and firms see more gloom ahead, raising expectations that policymakers will have to take more action to forestall a sharper slowdown.
The yuan and money rates dipped after the People’s Bank of China (PBOC) cut banks’ reserve requirement ratios by 50 basis points, a widely expected stimulus move to support the world’s second-biggest economy.
The CSI300 index closed down 1 per cent after surging 2.5 per cent at the open, while the Shanghai Composite Index .SSEC ended down 1.2 per cent after opening up 2.4 per cent, in Shanghai.
Blue chips fell across the board, but the NASDAQ like Chi Next composite ended up 0.9 per cent.
Jing Ning, Portfolio Manager at Fidelity Worldwide Investment, wrote in note the cut was largely priced in to the stock market (already), but it has reconfirmed an important message to investors that China’s monetary cycle has firmly shifted to the loosening camp.
China’s economy grew at its slowest pace in 24 years in 2014 and is expected to cool further to around 7 percent this year, even with additional stimulus, weighed down by a cooling property market, industrial overcapacity and slowing investment.
