Fall in funding costs lifts Shanghai shares

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September 20, 2014

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Fall in funding costs lifts Shanghai shares

By Ye Zhen | September 20, 2014, Saturday |

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SHANGHAI stocks rose for third straight day yesterday as funding costs fell following the central bank’s move to boost liquidity. The Shanghai Composite Index rose 0.58 percent to 2,329.45. The index shed 0.11 percent for the week.

The seven-day repurchase rate, a gauge of funding costs in the interbank market, fell 4.50 basis points to 3.34 percent yesterday. The decline came after the People’s Bank of China cut the 14-day repo rate by 20 basis points to 3.5 percent on Thursday. The bank also reportedly provided 500 billion yuan (US$82 billion) to the five largest banks through the Standing Lending Facility.

“Risk-free rates are expected to fall. It adds impetus of a recovery in the stock market valuation,” said Xiao Shijun, analyst with Guodu Securities.

However, analysts with Minsheng Securities were less optimistic. “Falling risk-free rates will not necessarily lead to a rebound in the A-share market as downward pressure on corporate profitability remains amid a weak economy,” a Minsheng Securities report said.

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Fall in funding costs lifts Shanghai shares

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