Chinese central bank injection to avert crunch

THE PEOPLE’S Bank of China (PBOC) intervened to boost liquidity yesterday, acting to head off a further credit crunch in the country’s squeezed and secretive monetary system

China’s central bank announced in social media that it will ensure stability in markets, and is reported to have injected about 255bn yuan (£25.59bn) into the country’s interbank market. Last year, the Shanghai interbank offered rate (Shibor) soared as the country came under financial pressure.

With Zhou Xiaochuan as governor, the bank has become more transparent, but is still limited in the amount of information it reveals about interventions in Chinese markets.

“The Shanghai Composite remains one of the worst performing equity indices in the Asia region, exceeding even the poor year to date performance of Brazil’s Bovespa,” said Deutsche Bank’s Jim Reid, who conceded that the PBOC’s action had “provided some relief”.

Ashmore’s head of research Jan Dehn offers a bullish view of Chinese markets, along with a few other select emerging markets: “Valuations in emerging market equities are trading at more than a 40 per cent discount to developed markets, yet benefit from strong domestic fundamentals, growing consumer demand and a recovery in foreign demand,” adding that valuations will “become too cheap to ignore”.