Photographer: Billy HC Kwok / Bloomberg
Photographer: Billy HC Kwok / Bloomberg
A chill swept through Chinese financial markets after the central bank withdrew cash from the banking system and an official warned about asset bubbles.
The People’s Bank of China drained about $ 12 billion on Tuesday through open market operations. The decision was unusual in the weeks leading up to the Lunar New Year holidays, which in 2021 fall in mid-February, because residents often need more money to pay for seasonal travel and gifts. It was also against the recent ones informs Chinese newspapers that liquidity would not be reduced before the holidays.
While Tuesday’s pullback was small in isolation, it added to signs that Beijing is wary of the amount of cheap and plentiful liquidity that has caused the excess in the markets. Said PBOC advisor Ma Jun local media presenting asset bubble risks, such as in the stock market or real estate, will be maintained if China does not shift its focus to employment growth and inflation management.
Read: Pandemic-era central banking is creating bubbles everywhere
The reaction was particularly brutal in the Hong Kong stock market, where land funds helped underpin a global rally. Continental investors bought a net worth of A $ 250 billion ($ 32 billion) in Hong Kong shares this year through Monday, nearly 40% of last year’s total, and became buyers again on Tuesday. The Hang Seng index fell to 2.7% from its highest level since June 2018, led by 6.7% immerse yourself in Tencent Holdings Ltd.
In mainland markets, an indicator of interbank debt costs jumped 32 basis points to 2.74% on Tuesday, the highest level in a year. Futures on Chinese government bonds that should have matured in a decade were about to record the biggest decline since September, while the CSI 300 index of Shanghai and Shenzhen stocks, which has approximated in the 2007 record, it fell to 2.1%.
“The PBOC wants to take investors out of the euphoria caused by abundant liquidity in December,” says Xing Zhaopeng, an economist at banking group Australia and New Zealand. “The PBOC is unlikely to loosen its portfolio chains at least this week, making liquidity between months very tight.”
PBOC Governor Yi Gang on Monday He said the central bank will try to support economic growth by limiting risks to the financial system, a continuation of its current political stance. Yi said China’s total debt-to-output ratio rose about 280% at the end of last year.
The fall of Tencent came after the shares rose 11% on Monday, its best day since 2011, to approach a trillion-dollar market value. With more than a billion people using its WeChat social networking platform, Tencent is ubiquitous for Chinese investors who do not have access to Hong Kong shares of rival Alibaba Group Holding Ltd. through commercial links.
– With the assistance of Jeanny Yu