China’s blue-chips end at 8-month high on hopes of lower financing costs

SHANGHAI: China’s blue-chip index closed at an eight-month high yesterday, as the country’s central bank planned to switch benchmark for floating-rate loans to lower funding costs, while investors cheered signs of economic resilience following a Sino-US trade truce.

The blue-chip CSI300 index rose 1.5 percent to 4,081.63, its highest closing level since April 19, while the Shanghai Composite Index ended up 1.2 percent at 3,040.02. China’s central bank said on Saturday it will use the loan prime rate (LPR) as a new benchmark for pricing existing floating-rate loans, in a step that analysts say could help lower borrowing costs and underpin economic growth.

“The purpose of the step is to make interest rates more market-driven and help lower financing costs,” said Wen Bin, an economist at Minsheng Bank in Beijing. Overall, it’s a favorable news for the equities market, though the impact on bond market could be quite limited, Huatai Securities said in a report.

Signs of recovery in the economy also added to optimism for the moment. China’s factory activity likely expanded again in December on stronger external demand and an infrastructure push at home, but the pace of growth is set to ease as markets await more certainty on a US-China trade truce, a Reuters poll showed. The poll followed data showing profits at China’s industrial firms grew at the fastest pace in eight months in November. — Reuters