Mainland China Stock Market Falls, PBoC Leaves Interest Rates Unchanged

Mainland China stock market, as well as stocks in most of the Asian-Pacific region, slipped on Good Friday following the People’s Bank of China’s (PBoC) decision not to lower interest rates. Given the Covid-induced slowdown of economic activities, analysts widely expected that the country’s central bank would cut interest rates for more stimulus.

On Friday, after a tussle to gain meaningful direction, Chinese stocks finally closed out in the negative zone. For instance, the Shanghai Composite was down 0.45%, eventually closing at 3,211.24, while the Shenzhen component retraced by 0.56% to 11,648.57.

There were also general declines across the board in other markets, starting with the Japanese outlook. For instance, the Nikkei 225 dipped by 0.29% to 27,093.19, while the Topix retraced 0.62% to close at 1,896.31. In addition, the SoftBank Group was down 1.21%, while Sony fell 2.52%.

In neighboring South Korea, the Kospi shed 0.76% to close at 2,696.06.

Several major markets in the mainland Chinese region are currently closed for the Good Friday holiday. In addition, several other markets in Hong Kong, Australia, Singapore, India, and New Zealand also remain closed to mark the public holiday.

Fresh Covid Outbreak Weighed Heavy on Mainland China Stock

Mainland Chinese stocks were under pressure throughout most of last week due to a fresh Covid outbreak. This outbreak represents the worst that China has experienced since the start of the pandemic, with Shanghai remaining under lockdown.

In a note, Shane Oliver, head of investment strategy and chief economist at Australian financial services firm AM, touched on the situation, saying:

“Chinese shares remained under pressure from concerns about Covid-related lockdowns. China is continuing to have problems managing the Omicron wave resulting in lockdowns under its ‘zero covid’ policy (albeit it’s looking at softening some of its approach) threatening Chinese growth and contributing to further supply disruptions globally.”

Furthermore, the decision by the Chinese central bank to leave (medium-term) interest rates unchanged did little to raise investor morale. Senior China economist at Capital Economics, Julian Evans-Pritchard, questioned the PBoC’s hesitancy in acting swiftly, saying:

“That’s somewhat surprising given the sharp economic downturn and recent calls from China’s leadership for monetary support.”

However, Evans-Pritchard also expressed a belief that the country’s governing bank would soon be invariably prompted into action.

“[The People’s Bank of China] will have little choice but to do more [including addressing interest rates] before long,” said he.

China also released home prices data showing a second month of consecutive decline in March for the country’s new residential prices. Compared to a year ago, home prices data only managed a 1.5% increase, representing the slowest pace since November 2015.

US Stocks

There was a decline in US stock on Thursday due to endemic factors, which capped off a losing week. Much of this had to do with rising inflation as well as mixed earnings results from leading banks.

The S&P 500 declined 1.21% to 4,392.59, while the tech-heavy NASDAQ Composite gave up 2.14% to close at 13,351.08. In addition, the Dow Jones Industrial Average lost 113.36 points (0.33%) to close at 34,451.23.

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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.