In an unexpected move, Chinese banks have chosen to maintain the key interest rate that guides mortgages, causing confusion about the country’s strategy for addressing the property market downturn. The People’s Bank of China has kept the five-year loan prime rate (LPR) at 4.2%, contrary to predictions of a 15 basis points cut. Last week, the important central bank policy loan rate was reduced, suggesting that a cut to the 5-year LPR was imminent. However, the one-year LPR was lowered by 10 basis points to 3.45%, a smaller cut than anticipated.
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Key developments from the previous night
Asian stock markets displayed mixed results as China’s measures to uplift confidence fell below expectations, reflecting the nation’s slow recovery and property challenges.
Despite reducing the one-year benchmark lending rate, China surprised the markets by keeping the five-year rate unchanged, causing the CSI 300 Index to drop by 0.5% and the Shanghai Composite Index to decline by 0.4%. Hong Kong’s Hang Seng Index also experienced a 1.4% decrease, while the Hang Seng China Enterprises Index fell by 1.3%. However, Tokyo shares rebounded after three consecutive days of losses with the help of bargain-hunting.
The Nikkei 225 index rose by 0.4% to close at 31,565.64, while the broader Topix index gained 0.2% and closed at 2,241.49. The Kospi in Seoul increased by 0.1% to 2,507.16, whereas Sydney’s S&P-ASX 200 dropped by 0.3% to 7,124.60. India’s Sensex opened with a 0.3% increase at 65,147.47. New Zealand and Singapore experienced declines, while Bangkok and Jakarta saw gains.
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