China’s roller-coaster stocks will again be under the spotlight after the central bank cut benchmark interest rates to a record low at the weekend, a move interpreted by analysts as an attempt to temper last week’s market meltdown.
The Shanghai Composite sank 7.4 per cent on Friday, wiping hundreds of billions of dollars off the total market capitalisation of the index. The market has reversed 18.8 per cent from its June 12 high, although it is still up almost 30 per cent in the year to date.
The People’s Bank of China appeared to respond on Saturday, when it cut the one-year lending rate by 25 basis points to 4.85 per cent — its fourth cut since November — and lowered the amount of reserves certain banks are required to hold by 50 basis points.