Shares in Asia staggered on Monday as China’s markets stumbled despite its central bank moving to pump more liquidity into the broader economy, as worries grow of a sharp knock to growth from an escalating trade dispute with the United States. The People’s Bank of China (PBOC) cut the level of cash that banks must hold as reserves, aimed at lowering financing costs as policy makers worry about fallout from the tariff row with the United States, Reuters reports.
Reserve requirement ratios (RRRs) - currently 15.5 percent for large commercial lenders and 13.5 percent for smaller banks - would be cut by 100 basis points effective Oct. 15, the PBOC said, matching a similar-sized move in April.
Asian shares were also hit on Monday as investors in Chinese stocks reacted for the first time to new pressure from Washington and a report that Chinese spies had compromised U.S. hardware.
China’s blue-chip CSI300 index was 3.6 percent lower in morning trade, while the country’s main Shanghai Composite Index lost 3 percent. The tech-heavy ChiNext board fell 2.9 percent.
“We expect the PBoC will continue its easing efforts to keep liquidity ample and loosen its credit control to make funds more accessible to the broader economy,” BofA Merrill Lynch analysts said in a note.
“Moreover, there is still room for further RRR cuts when necessary, though the chance for an interest rate cut is limited given the continued Fed rate hiking cycle, in our view.”