Chinese markets edged higher on Thursday after China’s central bank announced on Wednesday it was cutting the amount of cash that all banks must hold as reserves. The move releases around RMB 800 Billion (USD 114.91 Billion) in funds to shore up the slowing economy, according to Reuters.
The People’s Bank of China (PBOC) said on its website that it will cut banks’ reserves requirement ratio (RRR) by 50 basis points, effective on January 6. The decision would bring the level for big banks down to 12.5%.
The news sent the Shanghai Composite higher by 35.07 points or 1.15%, while the Shenzhen Component Index surged by 208.06 points or 1.99%. Meanwhile, Hong Kong’s Hang Seng Index soared by 353.77 points or 1.25%.
Since early 2018, the PBOC has now cut RRR eight times to free up more funds for banks to lend as economic growth continues to slow its pace.
“The RRR cut will help boost investor confidence and support the economy, which is gradually steadying,” said Wen Bin, an economist at Minsheng Bank in Beijing, who also expects another cut in China’s new loan prime rate (LPR) this month, said Reuters.
The decision by the PBOC also sent numerous Chinese-based stocks higher on Thursday morning.
Alibaba (NYSE: BABA) shares gained 3.4% to its all-time high of USD 219.32 per share. Meanwhile, Baidu (NASDAQ: BIDU) led the pack of Chinese tech giants by gaining 6.58% on Thursday morning. JD.com (NASDAQ: JD) rose by 4.44%, while Tencent Holdings increased by 3.44%.
Other notable gainers included YY (NASDAQ: YY), which rose by 9.3%. Weibo (NASDAQ: WB) soared by 8.1% and Momo (NASDAQ: MOMO) increased by 6.6%.