Asian Stocks Mixed, PBOC Cuts Vital Lending Rate

Asian stocks had a mixed trading session on Monday after the People’s Bank of China (PBOC) made the unexpected decision to cut a vital lending rate to strengthen growth, as the world’s second-biggest economy wanes due to frequent COVID-19 lockdowns and weak performance in the real estate sector.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down by 0.2% to $530.18 after climbing 0.9% in the previous week, while Japan’s Nikkei 225 rose 1.1% to ¥28,871 as its gross domestic product (GDP) surged to an annual rate of 2.2% in the three months ended June.

PBOC Cuts Vital Lending Rate

In a surprising move, the PBOC trimmed the one-year medium-term lending facility (MLF) loans for the first time since January in an effort to boost the country’s economic growth, which recently posted lower-than-expected figures in retail sales and industrial production for the month of July.

Chinese shares declined in response to the decision. The blue-chip CSI 300 dropped 0.1% to CN¥4,185, while the yuan shed 0.6% to 6.77 against the US dollar.

Analyst Chris Turner said investors might start speculating that the 6.80 level in the yuan-dollar pair may not be as possible as it appears, seeing that the PBOC has recognized the need for additional stimulus.

China’s central bank lowered the one-year MLF loans to certain financial institutions by ten basis points to 2.75% from 2.85%.

The move was made after data on Monday showed the country’s retail sales and industrial production slowed in July.

Retail sales were up 2.7% year on year in July, although it was lower than the 3.1% rate reached in June. Industrial production also slightly lost momentum in the same period, increasing 3.8% from 3.9% in the previous month.

Meanwhile, China’s property segment continued to weaken, as house prices in the country dropped 0.9% year on year in July to mark the largest annual fall in seven years.