The People’s Bank of China is expected to keep its benchmark one-year loan prime rate steady on Tuesday at 3.45% and cut its five-year rate, currently 4.20%, by 5-15 basis points to 3.95%. This latter rate influences mortgage rates.
Chinese stocks returned on Monday with a fairly decent performance – the Shanghai Composite rose 1.6% and the CSI 300 rose 1.2% – although given that Asian shares gained 2% during Lunar New Year, perhaps it wasn’t all that impressive.
Still, if the CSI 300 can close higher on Tuesday it will mark a sixth consecutive rise, something not seen since January 2023. Cautious optimism seems to be the prevailing mood, which Beijing will no doubt prefer to the outright gloom of late.
Many countries in Asia are experiencing a tightening of financial conditions, especially those with large dollar-denominated external debt and exposure to U.S. bond yields. But not Japan.
With stocks at the highest in 34 years, the yen near its weakest in 34 years, and domestic bond yields under 1%, financial conditions in Japan have rarely been looser.
