China’s stocks climbed the most in three weeks, spurred by a second-day drop in benchmark money-market rates after the central bank injected cash into the financial system. The yuan held near a 20-year high.
The Shanghai Composite Index rose 0.6 percent to 2,106.35 at the close, the biggest advance since Dec. 4. Volumes were down 40 percent as most Asian markets shut for the holidays. Oil producer PetroChina Co. and technology companies advanced. The seven-day repurchase rate, a gauge of funding availability in the banking system, slid 86 basis points to 5.58 percent.
China’s central bank conducted its first reverse-repurchase operation in three weeks yesterday, stepping up efforts to provide lenders with cash after the biggest surge in borrowing costs since 2011 sparked a sell-off in Chinese shares traded in Shanghai, Hong Kong and New York.
Lower interest rates have “helped calm the market,” Gao Hui, an analyst at Founder Securities Co., wrote in a note today. “Funding costs will be controlled with the help of fiscal fund transfers before the year-end.”
The People’s Bank of China auctioned 29 billion yuan ($4.8 billion) of seven-day repos yesterday after 300 billion yuan of targeted cash injections last week failed to hold borrowing costs down. The rate tumbled the most since February 2011.
The one-year interest-rate swap, the fixed payment needed to receive the floating seven-day repo rate, was little changed at 4.97 percent today. It touched a record 5.13 percent on Dec. 23, the highest in Bloomberg data going back to 2006.
The CSI 300 Index advanced 0.7 percent to 2,305.11 today. The Bloomberg China-US Equity Index added 0.3 percent in New York yesterday. Hong Kong’s markets are closed for the holidays.
PetroChina advanced 0.7 percent in Shanghai, the biggest gain since Dec. 2. Sanan Optoelectronics Co. jumped 7.1 percent to lead a gauge of technology shares to the biggest advance among industry groups in the CSI 300.
Chinese agriculture stocks rose after Premier Li Keqiang said China has to ensure food self-sufficiency and suitably increase food imports. Grain-seed producer Yuan Longping High-tech Agriculture Co. gained 1.5 percent and Stanley Fertilizer Co. gained 3.9 percent.
“The Chinese central bank’s fund injection is pretty symbolic given the short amount,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “We’ll probably see money-market rates stay relatively elevated toward the end of the year. Stocks will be pressured.”
The Shanghai Composite has fallen 7.2 percent this year amid concern liquidity will tighten before the resumption of new share offerings next month. The gauge is valued at 8.1 times projected profit for the next 12 months, the cheapest since July 31, according to data compiled by Bloomberg.
Beijing Tiantan Biological Products Corp. tumbled by the 10 percent daily limit. Local authorities in the southwestern province of Sichuan are investigating the death of a baby who had received a hepatitis B vaccine produced by the company, Chengdu Business Daily reported. Calls to the office of Beijing Tiantan’s general manager weren’t immediately answered.
The yuan was little changed at 6.0710 per dollar. The Chinese currency advanced to 6.0702 on Dec. 23, the strongest level in 20 years since the government unified the market and official rates at the end of 1993. The previous record was 6.0703 touched on Dec. 10.
The yuan is expected to continue modest appreciation in 2014, underpinned by a large trade surplus and capital inflows lured by interest rates, said Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group Ltd.
— With assistance by Shidong Zhang, and Helen Sun