China Stocks end mixed

The Mainland China share market finished session mixed on Tuesday, 20 July 2021, as China's central bank decision to keep its benchmark lending rate for corporate and household loans unchanged this month, despite growing expectations for a cut after a surprise lowering of bank reserve requirements.

At closing bell, the benchmark Shanghai Composite Index declined marginal 0.07%, or 2.33 points, to 3,536.79. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.18%, or 4.43 points, to 2,456.75. The blue-chip CSI300 index fell 0.09%, or 4.49 points, to 5,109.

The People's Bank of China (PBOC) kept the benchmark loan rate unchanged, indicating that the central bank is continuing to keep policy stable despite a recent surprise move to add liquidity to the financial system. The one-year loan prime rate (LPR) was kept at 3.85%. The five-year LPR remained at 4.65%. The rate was unchanged for the 15th straight month.

PBOC lowered the amount of cash that banks must hold as reserves, releasing around 1 trillion yuan ($154.21 billion) in long-term liquidity to underpin its post-COVID economic recovery that was starting to lose momentum. However, the central bank then kept borrowing costs of medium-term lending facility (MLF), which serves as a guide for the LPR, unchanged at its latest operation last week, when it partially rolled over maturing loans.

CURRENCY NEWS: China yuan went up from a 10-day low against the dollar on Monday on steady fixing of the benchmark lending rate and corporate demand. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 6.4855 per dollar, 155 pips or 0.24% weaker than the previous fix of 6.4700, the weakest since May 6. The spot market CNY=CFXS bounced from a 10-day low of 6.4915 per dollar hit on Monday and traded at 6.4870 by midday, 35 pips firmer than the previous late session close.

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