China stocks climb on benchmark rate cut; homebuilders drop

China stocks climbed on Thursday after a widely expected cut in the benchmark prime lending rate, the latest support move to reduce financial strains on companies dented by the coronavirus outbreak. At the midday break, the Shanghai Composite index was up 0.5% at 2,989.31 points. The blue-chip CSI300 index gained 0.9%.

CSI300's financial sector sub-index was trading 0.2% higher, the consumer staples sector climbed 1.7% and healthcare shares rose almost 1%. Chinese H-shares listed in Hong Kong lost 0.8%, while the Hang Seng Index also fell 0.8% to 27,431.6. The smaller Shenzhen index gained 1% and the start-up board ChiNext Composite index was higher by 1.4%. China cut the benchmark lending rate on Thursday, as widely expected. The one-year loan prime rate was lowered by 10 basis points to 4.05% from 4.15%, while the five-year tenor fell 5 basis points.

"The latest LPR cut will help companies weather the damage from the coronavirus at the margins. But even if the decline is passed on to all borrowers, that would only decrease average one-year bank lending rates from 5.44% to 5.34%," Capital Economics said in a note to clients. "The ability of firms to postpone loan repayments and access loans on preferential terms will matter more in the near-term," it added, referring to support measures announced earlier.

The People's Bank of China said on Wednesday the impact of the coronavirus on the economy will be limited as the epidemic has not changed the country's economic fundamentals. The central bank also said it will not use the property market as a means of short-term stimulus. The real estate sub-index of the CSI300 fell 0.9%, while property developers in Hong Kong lost 1.4%.

China reported a dramatic drop in new cases in the province at the heart of the coronavirus outbreak, official data showed on Thursday. However, scientists reported the new virus may spread even more easily than previously believed.

However, lingering concerns that the epidemic is not yet contained dragged Hong Kong stocks lower, said Francis Lun, CEO at GEO Securities. "It doesn't matter how much stimulus you pour in, if the epidemic is not under control," he said. Stocks linked to HNA Group surged in mainland China and Hong Kong, following a report of a planned state takeover of the group as coronavirus hits business.

Around the region, MSCI's Asia ex-Japan stock index fell 0.7%, while Japan's Nikkei index was up 0.4%. The offshore yuan fell more than 0.3% to 7.04 per dollar in morning trade, its weakest level since last December. The Shanghai stock index is above its 50-day moving average and above its 200-day moving average.

 

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)