Economic news

China set to cut lending benchmarks Monday as economy worsens

2023.08.20 20:08


© Reuters. FILE PHOTO: Paramilitary police officers stand guard in front of the headquarters of the People’s Bank of China, the central bank (PBOC), in Beijing, China September 30, 2022. REUTERS/Tingshu Wang/File Photo

SHANGHAI/SINGAPORE (Reuters) -China is expected to cut lending benchmarks at a monthly fixing on Monday, with many analysts predicting a big reduction to the mortgage reference rate to revive credit demand and shore up the ailing property sector.

The loan prime rate (LPR) normally charged to banks’ best clients is calculated each month after 18 designated commercial banks submit proposed rates to the central bank, the People’s Bank of China (PBOC).

In a poll of 35 market watchers, all participants predicted cuts to both the one-year LPR and the five-year tenor, after the central bank unexpectedly lowered the medium-term policy rate this week.

The medium-term lending facility (MLF) rate serves as a guide to the LPR and markets mostly use the MLF rate as a precursor to any changes to the lending benchmarks. The monthly fixing of the LPR is due next Monday.

Among the 35 survey participants, 19, or 54%, expected a 15-basis-point cut to the one-year LPR – on which most new and outstanding loans are based and is currently at 3.55%. The remaining 16 traders and analysts forecast a modest 10 bp reduction.

And 33, or 94% of them, predicted the five-year rate, which serves as the mortgage reference rate, to be trimmed by at least 15 bp. The five-year LPR currently stands at 4.20%.

“After the earlier than expected policy rate cut, we are penciling in a 10 bp cut in one-year LPR and 20 bp cut in five-year LPR to further shore up the property sector,” Citi analysts said in a note.

They also expect the central bank to deliver a 25 bp to banks’ reserve requirement ratio (RRR) cut soon.

Market expectations for further monetary easing follow economic data that showed tumbling credit lending and mounting deflationary pressure. Meanwhile, default risks at some housing developers have dented financial market confidence.

In response to a deepening property market crisis, the central bank pledged it would adjust and optimise property policies, according to its second-quarter monetary policy implementation report published this week.

“According to previous modus operandi of the PBOC, we should expect a symmetrical, outsized 10-15 bp cut to the one-year and five-year next week,” said Carlos Casanova, senior economist for Asia at UBP.

“Looking forwards, we expect that the PBOC will also follow through with additional 50-75 bp in RRR cuts and balance sheet expansion to mitigate risks in key sectors, such as local government financing vehicle (LGFV) debt and regional housing markets.”

Source link

Related Articles

Back to top button
bitcoin
Bitcoin (BTC) $ 74,827.05 1.59%
ethereum
Ethereum (ETH) $ 2,814.88 7.54%
tether
Tether (USDT) $ 0.999901 0.03%
solana
Solana (SOL) $ 187.77 2.06%
bnb
BNB (BNB) $ 594.17 2.55%
usd-coin
USDC (USDC) $ 0.999884 0.14%
xrp
XRP (XRP) $ 0.548914 2.93%
dogecoin
Dogecoin (DOGE) $ 0.190639 3.29%
staked-ether
Lido Staked Ether (STETH) $ 2,814.64 7.64%
tron
TRON (TRX) $ 0.160647 1.18%
cardano
Cardano (ADA) $ 0.370705 3.44%
the-open-network
Toncoin (TON) $ 4.84 2.31%
wrapped-steth
Wrapped stETH (WSTETH) $ 3,319.74 7.14%
shiba-inu
Shiba Inu (SHIB) $ 0.000019 0.69%
avalanche-2
Avalanche (AVAX) $ 26.85 3.27%
wrapped-bitcoin
Wrapped Bitcoin (WBTC) $ 74,735.02 1.24%
weth
WETH (WETH) $ 2,814.03 7.38%
chainlink
Chainlink (LINK) $ 12.28 3.92%
bitcoin-cash
Bitcoin Cash (BCH) $ 375.37 1.10%
sui
Sui (SUI) $ 2.23 1.11%
polkadot
Polkadot (DOT) $ 4.06 0.25%
leo-token
LEO Token (LEO) $ 6.20 1.15%
usds
USDS (USDS) $ 1.00 0.57%
uniswap
Uniswap (UNI) $ 8.92 1.93%
litecoin
Litecoin (LTC) $ 70.72 1.55%
wrapped-eeth
Wrapped eETH (WEETH) $ 2,960.23 7.49%
near
NEAR Protocol (NEAR) $ 4.14 0.34%
aptos
Aptos (APT) $ 9.60 3.06%
pepe
Pepe (PEPE) $ 0.00001 10.82%
bittensor
Bittensor (TAO) $ 512.02 0.41%
internet-computer
Internet Computer (ICP) $ 7.70 1.86%
fetch-ai
Artificial Superintelligence Alliance (FET) $ 1.40 1.07%
dai
Dai (DAI) $ 0.99974 0.12%
ethereum-classic
Ethereum Classic (ETC) $ 19.91 4.09%
monero
Monero (XMR) $ 162.02 0.90%
kaspa
Kaspa (KAS) $ 0.118403 0.94%
stellar
Stellar (XLM) $ 0.097734 1.54%
ethena-usde
Ethena USDe (USDE) $ 1.00 0.06%
whitebit
WhiteBIT Coin (WBT) $ 19.33 0.62%
aave
Aave (AAVE) $ 184.97 14.49%
polygon-ecosystem-token
POL (ex-MATIC) (POL) $ 0.3385 4.49%
blockstack
Stacks (STX) $ 1.66 0.37%
okb
OKB (OKB) $ 39.99 2.88%
first-digital-usd
First Digital USD (FDUSD) $ 0.995356 0.30%
dogwifcoin
dogwifhat (WIF) $ 2.33 0.01%
crypto-com-chain
Cronos (CRO) $ 0.08478 1.81%
arbitrum
Arbitrum (ARB) $ 0.570542 8.33%
filecoin
Filecoin (FIL) $ 3.70 2.42%
mantle
Mantle (MNT) $ 0.633431 8.55%
celestia
Celestia (TIA) $ 5.11 10.61%