China Daily Global Edition (USA)
Stocks bounce back on PBOC comments
Central bank’s reassurances on renminbi exchange rate steady equities trading
Mainland stocks closed higher on Tuesday after senior officials of China’s central bank emphasized their efforts to keep the yuan basically stable at a reasonable level.
The benchmark Shanghai Composite Index was up by 0.41 percent to 2786.9 points on Tuesday, with aerospace and military production, software and communication equipment companies leading the rise.
Military stocks including AeroEngine Control Co Ltd, AECC Aero Science and Technology Co Ltd, Jianglong Shipbuilding Co Ltd and AVIC Aviation HighTechnology Co Ltd increased by their daily limit of 10 percent.
The Shenzhen Component Index gained 0.45 percent to close at 9221.5 points. The ChiNext Index, tracking China’s Nasdaq-style highgrowth companies, closed 1.18 percent higher at 1607.12 points.
Despite the overall gains, all three indexes experienced significant drops in the morning session. The Shenzhen Component Index at one point plunged as much as 2.55 percent to 8945.4 points, posting its worst day over the past three years.
Yi Gang, governor of the People’s Bank of China, said on Tuesday that recent fluctuations in China’s foreign exchange market were largely due to a stronger US dollar and external uncertainties.
He said the central bank has watched the recent fluctuations closely, China’s economic fundamentals are sound and financial risks are largely under control.
“International payments are stable and cross-border capital flows are roughly balanced,” Yi said in a statement published on the PBOC’s website. “China will continue to implement prudent and neutral monetary policy to keep the yuan basically stable at a reasonable level.”
The central parity rate of the renminbi weakened 340 basis points to 6.6497 against the US dollar on Tuesday, hitting a new low since Aug 25, 2017.
The central bank’s Vice-Governor Pan Gongsheng said on Tuesday in Hong Kong that the mainland has ample foreign reserves and foreign exchange tools.
“China will clarify tax for foreigners buying offshore bonds and is confident about keeping the yuan stable in a reasonable range,” Pan said.
“China’s foreign exchange market has been fluctuating in recent weeks, and the positive remarks of China’s central bank leaders have shored up investors’ confidence,” said Dong Dengxin, a finance professor at the Wuhan University of Science and Technology.
He said that although Tuesday’s rise was a technical rebound, China’s A shares have almost bottomed out.
“The current A-share market valuation of the is at a relatively low level, so it’s a good time for medium and long-term investment,” Dong said.
Adequate impetus could drive a rebound of the A-share market, including a steady and improving economic environment, historically low valuation levels, steadily improving financial performances of listed companies, and expanding foreign capital net inflow, according to Securities Daily.