China Stocks Fall on COVID Concerns, Reserve Ratio Cut Disappoints

(Stock)

China stocks closed down on Monday, with investors disappointed about a smaller-than-expected cut in the reserve requirement ratio (RRR) that many felt might not be enough to reverse a sharp economic slowdown.

Unexpectedly strong gross domestic product data for the first quarter of 2022 failed to lift the market, with analysts saying the key question was whether authorities would make adjustments to the tough anti-COVID-19 measures.

The blue-chip CSI300 index fell 0.5% to 4,166.38, while the Shanghai Composite Index lost 0.5% to 3,195.52 points. The Hong Kong market is closed for a holiday.

The People's Bank of China (PBOC) said on Friday it would cut the reserve requirement for all banks by 25 basis points (bps), releasing about 530 billion yuan ($83.25 billion) in long-term liquidity to cushion a slowdown.

"This is less than what the market expected, as the PBOC RRR cut has always been 50bps or higher in the past," said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

Analysts said the small cut may reflect concern by the Chinese central bank over inflation and U.S. monetary tightening, making further interest rate cuts less likely.

China's gross domestic product (GDP) beat analysts' expectations with a 4.8% increase in the first quarter from a year earlier, while data on March activity showed weakness in consumption, property and exports affected by COVID-19 curbs.

"We expect a stronger macro policy response in the second quarter to shore up growth, but the impact will be limited in the context of restricted mobility," said Tommy Wu, lead China economist at Oxford Economics.

Heightened global risks from the war in Ukraine, and the COVID lockdowns in China and a weak property market have roiled its financial markets, with authorities vowing to stabilise them and support the economy.

Real estate developers tumbled 4.3%, while financial and energy stocks closed down 3% each.

As a growing number of business leaders and analysts warn that a strict zero-COVID policy is triggering economic disruptions, China said on Friday it would help hundreds of companies in key sectors to resume production in locked-down Shanghai.

Sectors that will resume work include semiconductors, automobiles and the medical industry, the Ministry of Industry and Information Technology said.

Shares in semiconductors and automobiles climbed 3.9% and 2.3%, respectively, while healthcare firms edged down 0.4%, with traders closely watching whether the resumption will be effective.

China's supply chains must be stabilized amid COVID-19 outbreaks, and authorities must ensure traffic permits for drivers are recognized across the country, the official Xinhua news agency quoted Vice Premier Liu He as saying.

Pig farmers led a 1.3% increase in the agriculture sector , as data showed China posted its highest quarterly pork production in more than three years during January through March, reflecting a boost in breeding following a disease-led decline.

To reduce funding costs, China's interest rate regulatory body is encouraging some banks to lower their deposit rate ceilings, two sources told Reuters on Friday.

(Reporting by Jason Xue and Andrew Galbraith; Editing by Bradley Perrett, Robert Birsel and Amy Caren Daniel)

More from Farm Journal's PORK:

 

China Q1 Pork Output Hits Highest in Three Years

 

Latest News

Hogs and Pigs Report: How Will Increase in Pigs Saved Per Litter Impact the Pork Outlook?
Hogs and Pigs Report: How Will Increase in Pigs Saved Per Litter Impact the Pork Outlook?

Of all the numbers in the latest USDA Hogs and Pigs Report, the number that caught economists’ eye was pigs saved per litter. Here's why Steve Meyer, Ever. Ag senior economists, says this is a number to watch.

Why You Need to Understand How USDA Purchase Programs Work
Why You Need to Understand How USDA Purchase Programs Work

With pork producers facing prolonged economic headwinds, recent USDA commodity purchases of pork offer relief at pivotal times. It’s important to understand how these programs work, says NPPC president Lori Stevermer.

Get the Facts Straight on Highly Pathogenic Avian Influenza
Get the Facts Straight on Highly Pathogenic Avian Influenza

Now that the mystery illness impacting some dairy herds has been revealed as the same strain of Highly Pathogenic Avian Influenza that has been impacting the U.S. poultry flock, pork producers are asking questions.

Merck Introduces Sequivity with Microsol Diluvac Forte Adjuvant Prescription Vaccine
Merck Introduces Sequivity with Microsol Diluvac Forte Adjuvant Prescription Vaccine

Merck Animal Health announced it has received license approval from the USDA for Sequivity with Microsol Diluvac Forte adjuvant prescription vaccine for use in gilts and sows. 

What Does the Next Generation of the Pork Industry Want?
What Does the Next Generation of the Pork Industry Want?

It’s easy to make assumptions about what others think, but recent research funded by the Indiana Pork Producers Association and the Indiana Soybean Alliance proves it’s always better to go to the source itself.

Skills Survey Reveals U.S. Agriculture & Food Industry Workforce Needs and Gaps
Skills Survey Reveals U.S. Agriculture & Food Industry Workforce Needs and Gaps

U.S. employers report challenges in finding suitable job candidates with work-ready skills to fill open roles in ag. The AgCareers.com U.S. Skills Survey offers insights, data and trends to address skill development.