Shanghai Exchange Money Rate Jumps as IPOs Fuel Cash Demand

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An interest rate for overnight loans on the Shanghai Stock Exchange climbed for a second day on speculation investors borrowed cash to subscribe for new share sales.

Initial public offerings by 25 companies between May 5 and May 11 could freeze 2.34 trillion yuan ($377 billion) of funds, according to data compiled by Bloomberg. Newly-listed shares in China this year have surged an average 44 percent on the first day of trading, the data show, making them an attractive bet for investors. The People’s Bank of China refrained from conducting open-market operations this week.

The overnight repurchase rate on the Shanghai bourse rose 106 basis points to close at 3.1 percent, after jumping as much as 796 basis points earlier, according to data compiled by Bloomberg. The gauge slumped in each of the last three months.

“The IPOs have frozen some funds in the market, driving up the overnight rate,” said Chen Peng, a fixed-income analyst at Fortune Securities Co. in Shenzhen.

The seven-day repo rate, a gauge of funding availability in the interbank market, was little changed at 2.33 percent as of 4:12 p.m. in Shanghai, a weighted average from the National Interbank Funding Center shows. The cost of one-year swaps, the fixed payment to receive the floating seven-day repurchase rate, fell five basis points, or 0.05 percentage point, to 2.56 percent, data compiled by Bloomberg show.

China’s exports probably climbed 1.6 percent in April from a year earlier after declining 15 percent in the previous month, a median of estimates in a Bloomberg survey showed before data due Friday. A private gauge of manufacturing dropped in April, according to a report Monday.

The central bank could cut interest rates this month, probably by more than 25 basis points, Credit Agricole CIB wrote in a note Tuesday. The PBOC has lowered rates and banks’ reserve-requirement ratios twice since November, besides easing rules to boost the property market.

— With assistance by Fion Li, and Laura Yin

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