US-listed Chinese Shares Soar, Yuan Hit 16-Month High on China's New Stimulus

TMTPost -- A gauge of U.S.-listed shares of Chinese firms run to best day in two years and China’s yuan hit the highest in more than a year against the U.S. dollar on Tuesday, after Beijing unveiled a wide range of stimulus measures to bolster economy and its stock market.

Credit：Xinhua News Agency

The Nasdaq Golden Dragon China Index, which tracks 65 China-exposed U.S.-listed companies, settled 9.1% higher to 6457.90, the highest close since May 22. The gauge registered its largest daily gain since 2022. The American depositary receipts (ADRs) of Temu operator PDD jumped 11.2%, and its domestic e-commerce peers Alibaba Group and JD.com rose 7.9% and 13.9%, respectively. Shares of Chinese electric vehicle makers--Xpeng Inc., Nio Inc. and Li Auto Inc. all popped more than 10%. Exchange-trade funds (ETFs) tracking the investment in Chinese equities accordingly rose. The KraneShares CSI China Internet ETF and the Invesco China Technology ETF advanced 10.3% and 9.6%, respectively.

The offshore Chinese yuan strengthened to as high as 6.9951 per U.S. dollar on Wednesday, for the first time rally past the 7 per dollar milestone since May 2023. the The currency refreshed a 16-month high hit Tuesday and extended a rally of around 4% from a year-todate low touched in July, driven by expectations that the U.S. Federal Reserve will further easy policy after lowering the target range for the federal fund rate by 50 basic points (BPs) last week.

Chinese stocks and yuan rallied on back of new stimulus from Beijing, highlighting its dermination to revive its economy and stablitiy of the stock market. Among them, China’s central ban announced its biggest stimulus since the Covid-19 pandemic.

Chin would cut the reserve requirement ratio (RRR) by a half percentage points, or 50 BPs, in the near future, providing about RMB 1 trillion (about US$141.82 billion) in long-term liquidity to the financial market, said Pan Gongsheng, governor of the People's Bank of China (PBOC), at a press conference Tuesday. Depending on the liquidity situation in the market, RRR may be further lowered by 25 to 50 BPs within the year, Pan said. The central bank will also reduce the interest rate of seven-day reverse repurchases from 1.7% to 1.5%, according to Pan.

The reduction was aimed at guiding the loan prime rate and deposit rate to move downward and maintaining stability in the net interest margin of commercial banks, said Pan.

Pan said the central bank would keep monetary policy accommodative, strengthen monetary policy regulation, make monetary policy regulation more precise, and create a sound monetary and financial environment for stable economic growth and high-quality development.

Pan also announced China’s biggest package yet to bosst its property market. He said China will lower mortgage rates on existing home loans to a level similar to those of newly issued housing loans. The average reduction in mortgage rates for existing home loans is expected to be around 50 BPs, he said.

"The new policy, which is conducive to further reducing borrowers' mortgage interest expenses, is expected to benefit 50 million households, or a population of 150 million," said Pan. This move is expected to reduce the total interest expenses for households by approximately RMB150 billion per year on average, which will help boost consumption and investment, Pan added.

Moreover, the central bank will create new monetary policy tools to support the stable development of the stock market, said Pan. The central bank will establish a swap program for securities, funds and insurance companies to obtain liquidity from the central bank through asset collateralization. The program will significantly enhance companies' ability to acquire funds and increase their stock holdings, Pan said. The central bank will also create a special re-lending facility to guide banks to provide loans to listed companies and their major shareholders for buybacks and increasing shareholdings, he said.