China Stocks Edge Higher as Banks Weigh Cut to Mortgage Rates

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Chinese stocks eked out modest gains early Wednesday, following news that the nation’s largest banks are preparing to cut interest rates on existing mortgages and deposits to shore up growth in the world’s second-largest economy.

The CSI 300 Index climbed as much as 0.6%, set for the third day of advances. A gauge of mainland financial stocks fell amid persistent concerns about their margins. The benchmark for onshore stocks rose in the previous two sessions after authorities cut stamp duty for the first time since 2008 and placed curbs on share sales by major stakeholders, among other measures to boost investor confidence.

Big state-run lenders are planning to reduce rates on the majority of the nation’s 38.6 trillion yuan of outstanding mortgages, according to people familiar with the matter. Some major banks are poised to cut deposit rates later this week for the third time in a year, they said. The steps are the latest in a flurry of state-directed measures as authorities seek to arrest a slump in the market and reach the 5% economic growth goal.

It is “negative for banks but good for property developers, consumer discretionary and overall market sentiment,” said Redmond Wong, a strategist at Saxo Capital Markets. Cutting rates on existing mortgages may weigh on the profitability of banks, and even though they are likely to cut deposit rates, their net interest margin will still remain under pressure, he said.State-run newspapers said the rebound in Chinese equities this week shows investor sentiment is improving.

 

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