PBOC Will Raise Reserve Ratios for Banks Who Don't Meet Criteria

China’s central bank said some banks will be forced to lock away more reserves, a move that may contain credit growth after advances by smaller lenders jumped in January.

Some banks no longer meet criteria for preferential reserve requirement ratios and will have those levels increased, the People’s Bank of China said Friday in a statement.

Prior to the announcement, Bloomberg News reported that some lenders will face a higher ratio as officials seek to limit the risks associated with last month’s jump in credit. The PBOC said its action wasn’t driven by the speed of lending.

The central bank also said a review it carried out found that some banks which previously didn’t meet the criteria for preferential ratios now do so. Adjustments to banks’ reserve requirement ratios will be made from Feb. 25, according to the PBOC.

In 2014, the PBOC introduced preferential reserve requirement ratios for banks whose loans to the agricultural sector or to small companies exceeded certain thresholds in relation to their overall lending.

Since then, bad loans at Chinese banks have been piling up as economic growth weakened to the slowest pace in a quarter-century. PBOC data released this week that showed lending jumped to a record in January stoked concerns that financial-system risks may be increasing.

This week’s data from the central bank indicates China’s four biggest banks weren’t the driving force behind last month’s credit binge. Small- and medium-sized lenders extended a combined 1.45 trillion yuan ($222 billion) of the new loans in January, accounting for 60 percent of the total increase, the data show.

The central bank defines small and mid-sized lenders as those which had less than 2 trillion yuan of assets at the end of 2008. The four banks had set lending targets for this year that were little changed from 2015, separate people with knowledge of the matter said Friday.

The collective market share for Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. dropped to 20 percent last month from almost 40 percent in December, the figures show.

Chinese Stocks Extend Monthly Rout as Energy Producers Decline

Chinese stocks fell, extending last month’s rout, as traders unwound bullish bets and oil’s drop below $30 a barrel weighed on energy producers.

The Shanghai Composite Index slid 0.4 percent to 2,739.25 at the close, extending its slide this year to 23 percent. China Coal Energy Co. and PetroChina Co. led a gauge of energy companies to a record low. 

Developers gained after the central bank lowered mortgage down payments for first-home buyers. The Hang Seng China Enterprises Index tumbled 2.6 percent at 3:03 p.m., heading for its lowest close since March 2009.

Margin debt in China’s stock market shrunk to the lowest level since December 2014 on Monday, a sign of waning investor confidence after the Shanghai Composite’s biggest monthly tumble since 2008. 

The central bank said it will allow banks to cut the minimum required mortgage down payment to 20 percent from 25 percent for first-home purchases to the lowest level ever, as it steps up support for the property market. Mainland markets will be closed all next week for lunar new year holidays.

“The fear is that the stock market will continue to fall despite huge declines of late as the economy performs very poorly,” said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong. 

China rout, oil gloom deepen losses in Asian shares

A plunge in Chinese share markets capped a miserable day for Asian equities on Tuesday, with a renewed slide in oil prices giving investors few reasons to reassess a darkening outlook for the global economy. 

Japan's Nikkei .N225 fell 2.4 percent while Hong Kong's Hang Seng Index .HSI declined 2.3 percent, with MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS falling 1.5 percent after two days of gains since late last week.

Mainland Chinese shares .SSEC .CSI300 slumped more than six percent to a 14-month low in another sign that authorities in Beijing have their work cut out in their efforts to stabilise the fickle domestic markets.

European shares are expected to follow suit. Spreadbetters are expecting Britain's FTSE .FTSE and France's CAC 40 to .FCHI fall by as much as 0.8 percent and Germany's DAX .GDAX to drop 0.7 percent.

Crude oil prices have tumbled around 7 percent so far this week as top producers show no sign of cutting production.

The chairman of Saudi Aramco said on Monday the firm is continuing to invest in oil and gas production capacity, despite cost-cutting because of low oil prices.

Iraq's output reached a record last month and a senior Iraqi official said Iraq may raise output further this year.

Oil prices have fallen more than 75 percent from their 2012 peaks as global output was boosted by U.S. shale oil production and demand growth turned tepid, partially caused by the Chinese economy's slowing growth.

The massive price fall is putting huge pressure on profitability of energy firms worldwide, which are in turn slashing investment and cutting jobs.

The U.S. S&P .SPX fell 1.6 percent to 1,877.08, led by a 4.5 percent drop in the energy sector .SPNY.

Asian stocks slide to four-year lows as oil spirals lower

Asian stock markets slumped to fresh four-year lows on Wednesday as a relentless slide in oil prices snuffed out an attempted rally on Wall Street and dealt a further blow to global investors' appetite for riskier assets.

European stocks were expected to fall sharply at the open on Wednesday with financial spreadbetters predicting Britain's FTSE 100 .FTSE to open down 2 percent, Germany's DAX .DAXI to fall 2.4 percent and France's CAC .FCHI to slip 2.2-2.4 percent.

U.S. crude wallowed at its lowest since 2003 after the world's energy watchdog warned the market could "drown in oversupply". U.S. futures CLc1 shed nearly 3 percent to $27.68 while Brent crude LCOc1 lost 2 percent to $28.21 a barrel.

In Asia, stocks surrendered all of Tuesday's rare gains with the MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS falling 2.6 percent on the day and hitting its lowest since October 2011.

Leading regional stocks lower was the Hong Kong stock market .HSI with the benchmark index falling 3.7 percent on the day, its single biggest daily fall since early August, with all of its 50 constituents in the red.

Japan's Nikkei .N225 closed down 3.7 percent, leaving it 20 percent below last year's peak, meeting the technical definition of a bear market. The pain was felt widely with Australian stocks down 1.3 percent and South Korea .KS11 off 2.3 percent.

Chinese markets fared only marginally better than regional counterparts amid mounting talk that more stimulus may be on the way, possibly before the Lunar New Year holidays in early February.
December factory output, investment and retail sales data released on Tuesday were all weaker than expected.

The CSI300 index .CSI300 fell 1.3 percent, after rallying more than 3 percent on Tuesday. The Shanghai Composite Index .SSEC eased 0.9 percent.

The government-backed China Securities Journal reported that Beijing had the policy space for further easing to support the economy, including raising deficit spending to around 3 percent of annual economic output.

China's central bank late Tuesday revealed it would inject more than 600 billion yuan ($91.22 billion) into the banking system to help ease a liquidity squeeze expected before the long Lunar New Year celebrations.

World stocks rise as slowing China growth boosts stimulus prospects

Shares in Europe and Asia rose and the dollar gained after data showing China's economy grew last year at its slowest pace in 25 years prompted investors to anticipate more efforts to spur growth.

Styrofoam bull and pig figure stand on a counter on the trading floor at the stock exchange in Frankfurt, Germany January 7, 2016.

Oil prices rose after strong Chinese fuel demand halted a slide to 2003 lows triggered by the lifting of sanctions on Iran, while metals prices rose.

Concerns about Chinese authorities' ability to rebalance the slowing economy have rattled investors this year after a plunge in stock markets and the yuan currency raised concerns growth may be slowing more rapidly.

China's economy grew 6.9 percent last year, and 6.8 percent year-on-year in the fourth quarter, down from 6.9 percent in the third and the weakest pace since the first quarter of 2009, data showed.

Quarter-on-quarter, growth slipped to 1.6 percent in the last three months of 2015 from 1.8 percent in the third.

In a sign of slower growth to come, other data showed retail sales, industrial output and fixed-asset investment last month all came in below the expectations of analysts polled by Reuters.

European shares opened higher, led by miners after metals prices rose following the Chinese data.

The pan-European FTSEurofirst 300 index rose 1.5 percent. The STOXX Europe 600 Basic Resources index, which includes miners, added 4.1 percent.

The dollar gained against the safe-haven Japanese yen in anticipation of further action by Beijing, possibly as soon as next month.

The U.S. currency gained 0.4 percent 117.76 yen while the euro fell 0.1 percent to $1.0887. The Australian dollar, whose fortunes are closely linked to China, a major market for Australia, rose 0.6 percent to $0.603.

Yen loses steam as yuan firms after China's anti-speculation move

The safe haven yen shed Monday's earlier gains after China's central bank unveiled a fresh step to curb offshore speculation in the yuan and also set a firmer guidance rate, soothing worries about the risk of a rapid fall in the yuan.

The yuan's slide to a near-five year low earlier this month had stirred renewed concerns about China's economic health and the outlook for global growth, heightening investor risk aversion.

Such concerns about the yuan eased for now, as the People's Bank of China announced a new move to curb offshore speculation in the currency, and also set a firmer midpoint rate for the yuan on Monday.

The dollar edged up 0.1 percent to 117.24 yen JPY=, up from a session low of 116.56 yen touched in early Asian trade on Monday as well as Friday's 4-1/2 month low of 116.51 yen.

The Australian dollar, often used as a liquid proxy for China plays, rose 0.8 percent to $0.6914, pulling away from a near seven-year low of $0.6827 set on Friday.

Still, market participants remained sceptical about the prospects for a sustained improvement in risk appetites, given the selloff in global equities seen so far in January.

Sterling remained on the defensive, dented by worries about Britain's economic outlook and jitters over a looming referendum on British membership in the European Union.

On Monday, sterling touched a low of $1.4251 GBP=D3, just below Friday's trough and setting a fresh 5-1/2 year low. Sterling was last up 0.1 percent at $1.4273.The euro eased 0.2 percent against the dollar to $1.0892 EUR=.

Chinese stocks, yuan slip amid global gloom

Chinese stocks and the yuan slipped despite the efforts of the authorities on Thursday, as the gloom in global markets obscured signs that China's economy may not be weakening as fast as some investors had feared.

China's central bank set a firmer mid-point rate for the yuan, signaling determination to hold the line against expectations of a sustained depreciation of a currency that has lost 5 percent of its value against the dollar since August.

Traders said yuan liquidity offshore had been very tight earlier in the week thanks to buying by state-backed banks, acting at the central bank's behest, which pushed overnight borrowing rates in Hong Kong to record highs, making it prohibitivly expensive to bet against the yuan.

A turbulent start to 2016, with the currency and stock markets tumbling, had stoked concerns that Beijing was losing its grip on economic policy, just as the country looks set to post its slowest growth in 25 years.

Asian share markets weakened across the board on Thursday, hit by steep losses on Wall Street overnight as a rout in oil prices heightened worries about the global economy. 

China's main stock indexes fell, with the Shanghai Composite Index .SSEC down 1.1 percent at the midsession interval, and the CSI300 index .CSI300 down 0.6 percent, below their September lows.

Currency Markets News

In currency markets, the safe-haven yen found itself temporarily out of favour as the dollar moved up to 118.30 yen from an early 117.61.

The Australian dollar, often used as a liquid proxy for the yuan, rallied over half a U.S. cent at $0.7026, while the euro slipped to $1.0827 from $1.0860.

The dollar rose 0.2 percent against a basket of currencies to 99.156, approaching resistance around the 100 barrier.

Likewise, low-risk sovereign bonds had to surrender a little of their recent gains and yields on 10-year debt nudged up 4 basis points 2.138 percent.

The hint of firmer demand from China provided a reprieve for commodity prices, which have been under the hammer for months.

U.S. crude edged up 40 cents to $30.84 a barrel, a day after breaching the $30 barrier for the first time in 12 years.

Benchmark Brent was quoted 26 cents higher at $31.12 a barrel. U.S. crude had fallen 17 percent in just seven sessions, a gift to consumers across the globe but also a strong force for disinflation.

China stocks up after circuit breaker axed, yuan fixed higher

China's major stock indexes rose strongly on Friday after Beijing ditched a circuit breaker mechanism that halted trading twice this week and had been blamed for exacerbating the market sell-offs it was designed to limit.

The People's Bank of China also raised its guidance rate for the yuan for the first time in nine trading days, having allowed the currency's biggest fall in five months on Thursday, sending shivers through regional currencies and global stock markets as investors feared it would trigger competitive devaluations.

Chinese markets have had a turbulent start to 2016, buffeted by the PBOC's lower yuan fixings against the dollar, two days of stock exchange suspensions, weak factory and service sector surveys, and worries about looming share sales by major stakeholders once a ban on such sales expires.

With the circuit breaker deactivated late on Thursday, the CSI300 index .CSI300 was up 3 percent at 3,393.61 points in early afternoon trade on Friday, while the Shanghai Composite Index .SSEC was up 2.8 percent at 3,211.12 points.

The CSI300 had lost around 12 percent in the first four trading days of 2016, giving up all the gains made in 2015.

The circuit breaker, which only came into effect on Jan. 4, came under fire for kicking in too soon with its initial pause in trading, and then encouraging a rush to sell before a second trigger halted the day's trade permanently. 

The yuan firmed in early trade, with dealers suspecting that the central bank intervened through state-run banks to support its currency, which could help allay fears that any depreciation would be allowed to continue at pace.

China battles to shore up stocks, yuan after globe-shaking slide

China struggled to shore up shaky sentiment on Tuesday a day after its stock indexes and yuan currency tumbled, rattling markets worldwide, but analysts warned investors to buckle up for more wild price swings in the months ahead.

Stocks fell more than 2 percent in early trade, prompting fears that exchanges were set for a second day of panic selling after a 7 percent dive on Monday set off a new "circuit breaker" mechanism, suspending trade nation-wide for the first time.

But both the central bank and the stock regulator reacted quickly, and major indexes recouped most of their initial losses despite a late afternoon scare.

The People's Bank of China (PBOC) poured nearly $20 billion into money markets, its largest cash injection since September, and traders suspected it was using state banks to prop up the yuan CNY=CFXS at the same time.

The China Securities Regulatory Commission (CSRC), for its part, announced it was planning new rules to further restrict share sales by major stakeholders in listed companies, and said it would further tweak the circuit breaker mechanism amid criticism that it had fueled Monday's sell-off.

The blue-chip CSI300 index .CSI300 ended up 0.3 percent at 3,478.78 points after bouncing in a 4 percent range, while the Shanghai Composite Index .SSEC dipped 0.3 percent to 3,287.71 points.  

Its heavy handed approach to the stock market crash and its surprise devaluation of the yuan in August had called its policymaking into question and sparked global market volatility.

China central bank expects economic growth of 6.8 percent in 2016

China's annual economic growth is likely to slow to 6.8 percent in 2016 from an expected 6.9 percent this year, the People's Bank of China said in a working paper published on Wednesday.

A Chinese national flag flutters in front of the headquarters of the People's Bank of China, China's central bank, in central Beijing, May 16, 2014.

China's consumer price index is likely to climb 1.7 percent in 2016 from this year, while its producer price index is forecast to fall 1.8 percent year-on-year, the central bank said in the research report.

The central bank expects China's fixed-asset investment to grow 10.8 percent in 2016 from this year and forecasts retail sales to rise 11.1 percent on-year.

China's exports are expected to rise an annual 3.1 percent in 2016 while imports are expected to grow 2.3 percent, the PBOC said in its projections.

China stock stars set for big bonuses, bond traders for payout cuts

Top China share traders are set to enjoy the spoils from year-end payouts, while their Asia fixed income counterparts and dealmakers will miss out despite a record year for mergers in the region, headhunters and senior bankers said.

Banks, including UBS and HSBC, saw a boom year in Asia stock trading, sources at those firms and recruiters said, thanks to a China buying frenzy in the first half of 2015 that pushed the Shanghai Shenzhen CSI 300 index up 47 percent from January to June.

Big payouts for China stock traders highlight the increasing divergence of bankers' variable pay, as global firms distribute a bonus pool shrunk by fines and weaker revenues among a smaller number of standout performers each year.

Profits from the first-half China stock market rally were strong enough to outweigh trading losses and slower sales during a summer market crash, headhunters said.

The fixed income business, though, has struggled amid higher capital costs, turbulent markets, and uncertainty over U.S. interest rate policy.

"Bonuses in Asia this year are going to be very polarized between equities and fixed income, even more so than last year," said Sarah Harte, a director at headhunting firm Sheffield Haworth.

Overall, bonuses in the equities investment banking business are expected to be broadly flat this year compared to 2014, as banks take a conservative position amid a gloomy outlook for 2016 due to the China downturn and regulatory costs, headhunters said.

China selloff pressure Asia stocks, yuan jumpy before IMF decision

An extended selloff in Chinese stocks pulled down Asian markets on Monday, while the yuan bounced on suspected intervention by Beijing hours ahead of an IMF decision on whether to promote it to a basket of global reserve currencies.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.6 percent, and was on course to book a loss of about 2.6 percent for the month of November, after making its first gains in six months in October.

Japan's Nikkei .N225 dropped 0.7 percent, though it posted a monthly gain of 3.5 percent.

European shares are seen following suit, with spread betters expecting France's CAC 40.FCHI to fall as much as 0.3 percent, and tip 0.2 percent declines each in Germany's DAX .GDAX and Britain's FTSE .FTSE.

Mainland Chinese shares .SSEC were fragile, sliding 3.2 percent at one point, after posting their biggest one-day losses in more than three months on Friday.

Market sentiment remained shaky due to the resumption of IPOs, renewed efforts by the securities regulator to clamp down on leveraged buying and concerns about the cooling economy.

The yuan, expected to get the IMF nod as a reserve currency later on Monday, jumped in offshore trade on suspected intervention by Beijing.

The offshore yuan rose to 6.4345 to the dollar CNH= after hitting a 2-1/2-month low of 6.4591 earlier.

The yuan has been hampered by speculation among some analysts that Beijing may allow the yuan to depreciate soon after its admission and may feel less pressure to push through promised reforms.

China's October Inflation

China October data shows deflationary pressure persists

China's October inflation data showed persisting if not intensifying deflationary pressure, spurring analysts to expect more moves to stimulate the slowing economy by year-end.

The October consumer price index (CPI) cooled more than expected, rising 1.3 percent from a year earlier. compared with 1.6 percent in September, National Bureau of Statistics (NBS) data showed on Tuesday. A Reuters poll expected a 1.5 percent rise.

The producer price index (PPI) fell 5.9 percent in October from a year earlier, equal to the September decline and slightly worse than economists' forecasts of a 5.8 percent drop.

On a monthly basis, consumer prices fell 0.3 percent, compared with a 0.1 percent increase in September.

Analysts agreed the weak inflation readings raised the odds of further stimulus soon, but were divided on whether that meant further rate cuts, greater fiscal outlays or both.

On Friday, Caixin Magazine quoted China's vice minister of finance indicating a fiscal deficit of 3 percent, well above the current planned 2.3 percent for 2015, might still be considered within a safe range.

China is already in its biggest easing cycle since the height of the financial crisis, but low inflation means that real interest rates remain high for many firms, especially manufacturers who have endured years of falling factory gate prices.

Asian Stock Market News - China Stocks

Asian shares slide as soft China surveys, U.S. data sap risk appetite

Asian stocks slid to their lowest level in nearly three weeks on Monday, as profit taking set in after soft Chinese factory surveys and U.S. consumer spending data raised concerns over the global economic outlook.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell as much as 0.7 percent, hitting its lowest level since Oct 14. Tokyo's Nikkei .N225 retreated 2.1 percent.

European shares are expected to open weaker, with spread-betters looking for Germany's DAX .GDAXI to fall 0.8 percent, France's CAC 40 .FCHI to drop 0.9 percent, and Britain's FTSE .FTSE to start 0.6 percent down.

Mainland China markets fell, with the main Shanghai index falling 1.2 percent .SSEC, hurt by the factory survey results and the government's crackdown on illegal futures trading.

China's factory activity fell for an eighth straight month in October, the Caixin purchasing manager's index (PMI) showed, fuelling fears the economy may still be losing momentum in the fourth quarter despite a raft of stimulus measures. ECONCN

"When the Fed says it is still considering a rate hike in December, there's limited room for share prices to rise further," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank.

The dollar lost 0.2 percent to 120.32 yen as the fall in Tokyo shares cooled risk appetite and favored the safe-haven Japanese currency.

The Fed did not hike rates last month but caused a stir by leaving the door open for a hike in December, again highlighting the divergence in monetary policies between the Fed and other central banks such as the European Central Bank and the BOJ.

Asian Stock Market News - China'a Factory

Asia's factories struggle with global demand gulf

An employee operates a machine as she works along a production line of a factory producing solar energy products in Shangrao, Jiangxi province, China, October 11, 2015.

Activity in China's colossal factory sector shrank in October as global demand stuttered, reinforcing the case for more stimulus and questioning whether the Federal Reserve can be confident enough to raise U.S. interest rates this year.

A crop of industry surveys out on Monday pointed to another poor month for trade across Asia as activity contracted in South Korea, Taiwan and Malaysia. Only Japan showed any hint of growth, perhaps thanks to the persistent weakness of the yen.

The run of pedestrian results will focus attention on the U.S. Institute for Supply Management (ISM) measure of manufacturing due later Monday which is forecast to have flatlined in October. ECONUS

The U.S. central bank surprised markets last month by downplaying global growth worries while opening the door wide to a rate hike in December.

Those optimists looking for signs of revival in Asia found slim pickings in the latest data.

Activity in China's manufacturing sector unexpectedly contracted in October for a third straight month, according to the official survey out on Sunday.

The Purchasing Managers' Index (PMI) held at 49.8 in October, missing market hopes for a break-even 50.0 reading, while new export orders shrank for the 13th month.

That was followed by the Caixin/Markit China PMI which focuses on small and mid-sized companies. It edged up to 48.3 in October, from 47.2, but still pointed to an eighth month of contraction.

China's woes are being felt among its neighbors. South Korea's exports slumped the most in more than six years in October, with hefty drops in shipments to China, the United States and Europe.

South Korea is the first major exporting economy to report monthly trade data and is home to global suppliers such as Samsung Electronics (005930.KS), Hyundai Motor (005380.KS) and Hyundai Heavy Industries (009540.KS).

The only promising news came from Japan where the Markit/Nikkei PMI hit the highest in a year at 52.4.

China urban unemployment rate up slightly to 4.05 percent at end of third quarter

Thousands of job seekers visit booths at a job fair in Chongqing municipality.

China's urban unemployment rate was 4.05 percent at the end of the third quarter, the social security ministry said on Tuesday, slightly higher than 4.04 percent at the end of the previous three-month period.

The government aims to create at least 10 million new jobs in 2015 and keep the urban jobless rate below 4.5 percent.

Asian Stock Market News - China's Central Bank

China cuts rates again as growth engine stalls

A woman rides past the headquarters of the People's Bank of China, the Chinese central bank, in Beijing.

China's central bank cut interest rates on Friday for the sixth time in less than a year, and it again lowered the amount of cash that banks must hold as reserves in a bid to jump start growth in its stuttering economy.

Monetary policy easing in the world's second-largest economy is at its most aggressive since the 2008/09 financial crisis, as growth looks set to slip to a 25-year-low this year of under 7 percent.

Yet underscoring China's drive to deepen financial reforms, which many believe are necessary to invigorate the economy, the People's Bank of China (PBOC) said it was freeing the interest rate market by scrapping a ceiling on deposit rates.

The change, which Beijing had promised to deliver for months, will in theory allow banks to price loans according to their risk, and remove a distortion to the price of credit that analysts say fuels wasteful investment in China.

The PBOC said on its website that it was lowering the one-year benchmark bank lending rate by 25 basis points to 4.35 percent, effective from Oct. 24. The one-year benchmark deposit rate was lowered by 25 basis points to 1.50 percent.

The reserve requirement ratio (RRR) was also cut by 50 basis points for all banks, taking the ratio to 17.5 percent for the biggest lenders, while banks that lend to agricultural firms and small companies received another 50-basis-point reduction to their RRR.