The People’s Bank of China opted to stand pat for a fourth consecutive meeting and kept both of its loan prime rates intact near historical levels, in line with market expectations, avoiding additional stimulus injections albeit the persistent slacking of domestic consumption and loss of economic momentum.
The 1-year loan prime rate, a proxy for most corporate and household borrowing was held intact at the 3% level and likewise the 5-year loan prime rate, a benchmark for mortgage rates was similarly left untouched at the 3.5% level.
In August retail sales, one of the most prominent releases for gauging the strength of domestic demand, fell to its lowest levels in 9 months, yet foreign direct investment (FDI), a gauge for international demand into Chinese products and services, albeit weakening it continues to attract interest from Japan (almost 60% increase), Switzerland (37%) and the UK (24%) as China’s high-tech industries fire on all cylinders.
US-Sino relations appear moderated in recent months, with the world’s largest economic superpowers learning how to get along, after a series of threatening exchanges. The latest breakthrough came late last week after President Xi and President Trump held discussions over the phone and news agencies reported that the conversations progressed smoothly, made headway on a TikTok agreement and also booked a face-to-face meeting in six weeks in South Korea to discuss trade, illicit drugs, and Russia’s war in Ukraine.
Chinese equities somewhat regaining their footing after a two-day decline and gear up to challenge the October of 2024 highs.
Technical Analysis
CN50 Chart – China A50 index seeks to climb further higher and challenge the 1-year peak last seen in October of 2024
Resistance: 15300 (R1), 15800 (R2), 16300 (R3)
Support: 14300 (S1), 13600 (S2), 13000 (S3)