Asian equities advanced Tuesday following China’s central bank decision to cut benchmark lending rates for the first time in seven months, signaling intensified efforts to support economic growth amid ongoing trade tensions with the United States.
The People’s Bank of China (PBoC) lowered the one-year loan prime rate (LPR) by 10 basis points to 3.00% and the five-year LPR, which influences mortgage rates, by the same margin to 3.50%.
This move aims to reduce borrowing costs for businesses and households, thereby stimulating loan demand and economic activity in the face of slowing retail sales, factory output, and property investment.
Coinciding with the LPR cuts, five major state-owned banks, including China Construction Bank and Industrial and Commercial Bank of China, reduced deposit interest rates by 5 to 25 basis points across various terms to protect their net interest margins while facilitating the easing of lending rates.
Investor sentiment was further buoyed by the Hong Kong trading debut of CATL, the world’s largest electric battery maker, whose shares surged approximately 13% after raising $4.6 billion in the largest IPO globally this year. Mainland Chinese indices showed modest gains, with the Shanghai Composite edging up 0.1% and Shenzhen’s smaller market also rising slightly.
Regional markets responded positively: Hong Kong’s Hang Seng climbed 0.9%, Tokyo’s Nikkei 225 rose 0.5%, Australia’s S&P/ASX 200 gained 0.6%, South Korea’s Kospi edged up 0.1%, and Taiwan’s Taiex increased 0.4%.
Despite these policy moves, economists caution that modest rate cuts alone may be insufficient to significantly boost loan demand or broader economic growth, with further easing likely as Beijing continues to navigate the economic challenges posed by the trade war and domestic headwinds.
In related developments, Australia’s Reserve Bank cut its benchmark interest rate by 25 basis points to 3.85%, citing inflation within target range and a cautious outlook amid global uncertainties[original text].
Meanwhile, U.S. markets showed muted gains following Moody’s downgrade of the U.S. government’s credit rating, which briefly pushed Treasury yields higher and added to concerns over fiscal sustainability and trade tensions.
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