Chinese shares rise, as central bank unexpectedly cuts rates

Chinese shares rise, as central bank unexpectedly cuts rates

2 March 2015, 07:51
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On Monday shares in China traded higher after the People's Bank of China (PBOC) unexpectedly cut interest rates at the weekend for the second time since November. The move is considered to be aimed at repelling deflation.

Hong Kong's Hang Seng was up 0.36% at 24,911.91 points in mid-morning trade.

The Shanghai Composite index was up 0.11% at 3,314.00.

The PBOC, China's central bank, cut the benchmark one-year lending as well as the deposit rate rate by a quarter of one percent. Analysts consider the move was aimed at repelling deflation.

A leading think tank in China said that the mainland's consumer prices inflation rate would probably increase by 1.2% year-on-year in the first quarter of 2015 - compared with 2% a year earlier - well below the government's target of 3.5%.

It also said China's economic expansion was expected to slow to 7% in the first three months of the year, lower than the 7.3% posted for the three months to December.

"Our country's economic growth still faces relatively heavy downward pressure amid structure adjustments," the State Information Centre think tank said in a research report.

The rate cut by the PBOC on Saturday came just before official factory activity data was released on Sunday.

According to Nicholas Teo of CMC Markets in Singapore, February's purchasing manager's index (PMI) data, which came in at 49.9, was better than analysts' expectations of 49.7.

January's official data came in at 49.8. A reading of below 50 indicates manufacturing is contracting. Monday's private report on China's factory activity indicated PMI rising to 50.7 in February from 49.7 in January.

As of the rest of Asia, Japanese benchmark Nikkei 225 was up 0.13% at 18,823.14 points while Australia's benchmark S&P/ASX 200 was up 0.66% at 5,968.10.

Market watchers in Australia said the index would likely rally on Monday as investors' expectations for a another rate cut on Tuesday continued to rise.

Korean Kospi share index was up 0.33% at 1,992.35 points despite official data released on Monday showing industrial output fell 3.7% in January from a month earlier - its worst fall in some six years.

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