China’s stock-index futures and exchange-traded funds tracking the country’s shares jumped after the central bank cut its benchmark lending rate for the fifth time since November.
Contracts on the SGX FTSE China A50 Index gained 4.9 percent at 2:20 p.m. in New York, while Hang Seng China Enterprises Index futures climbed 3 percent. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF advanced 2.2 percent to $30.79 in its first rally in four days, and a Bloomberg gauge of the most-traded Chinese companies trading in the U.S. rose for the first time in seven days, led by Internet and solar stocks.
The one-year lending rate will drop by 25 basis points to 4.6 percent effective Wednesday, the Beijing-based People’s Bank of China said on its website Tuesday. The one-year deposit rate will fall by 25 basis points to 1.75 percent. Policy makers also lowered the required reserve ratio by 50 basis points for all banks to cover funding gaps.
“Interest rate and reserve cuts are a positive development for the Chinese economy and markets,” Jorge Mariscal, chief investment officer for emerging markets at UBS Wealth Management in New York, which oversees $1 trillion in invested assets, said by e-mail. “They help the economy and remind us that authorities are not asleep at the wheel.”
The policy move came hours after the Shanghai Composite Index closed down 7.6 percent to extend the steepest four-day rout since 1996. Shares have plunged amid speculation the government had abandoned stock-market support measures.
China has halted intervention in the equity market this week as policy makers debate the campaign’s merits, according to people familiar with the situation. Some officials argue that falling stocks will have a limited economic impact and the costs of supporting the market are too high, said one of the people, who asked not to be identified because deliberations are private. Officials who back intervention say tumbling shares pose a risk to the banking system, the people said.
The yuan erased gains in offshore trading and the currency was 0.1 percent weaker versus the dollar. The Hang Seng China Enterprises fell 0.9 percent on Tuesday at its lowest level since March 2014.
The interest-rate cut also helped boost U.S.-listed Chinese stocks. The Bloomberg China-U.S. Index for American depositary receipts climbed 4.8 percent, rebounding from a 17-month low on Monday.
Weibo Corp., the Twitter-like social media operator which plunged a record 20 percent on Monday, advanced 14 percent to $11.02, while Alibaba Group Holding Ltd. climbed 5.4 percent to $69.33 for the biggest gain since May. Solar-panel maker JinkoSolar Holding Co. surged 26 percent in the steepest rally in three years.