China Shares Surge Following Easing Measure

Chinese stock prices surged today following the new easing measure carried out yesterday. The Shanghai Composite Index rose 1.68% to 2733.17. 

Shanghai Composite Index (^SS000001) Six Month

Previously on Monday, the Chinese market dropped 2.9% after the G20 meeting ended with no new plan to stimulate the global growth.  The People’s Bank of China later announced to cut the reserve requirement ratio by 0.5 percentage points after market close, the fifth time since last February.

Analysts estimate that this move would free up around 700 billion yuan, or 106 billion dollar, for banks to grant loans, aiming at adding more liquidity to the financial system and also benefiting the housing market.

On the other hand, China continues to create new measures to stimulate the housing market and to solve the massive unsold inventory problem. In Shenyang, a major city in the northeast China, the municipal government issued a tentative plan today to provide more subsidies for individuals’ home purchases and offer “zero down payment” for students and graduates.  Last week, the nation announced tax cut on home purchases to boost home sales.

Housing prices in first-tier cities have increased significantly in spite of the continued declining of prices in smaller cities. According to National Bureau of Statistic’s report from last week, Shanghai and Shenzhen home prices soared 17.5% and 52% in January. However, analysts estimated more than six years in order for the nation to get rid of the excess housing stock.

Moreover, new manufacturing figures show further contraction of the economy. The official China’s manufacturing PMI for February dropped to 49 from 49.4 in January, the lowest level in more than four years.  

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