China stocks end higher after reserve ratio cut buoys banks

SHANGHAI: China stocks ended higher on Wednesday, buoyed by banking firms, after a surprise cut in reserve requirements.

The blue-chip CSI300 index rose 0.5 per cent to 3,766.28, while the Shanghai Composite Index gained 0.8 per cent to 3,091.40.

Chinese banking shares closed up 1.1 per cent, after the central bank said late on Tuesday it was slashing reserve requirement ratios (RRRs) for most banks by 100 basis points (bps).

The move will reduce financing costs for banks and free up more funds for lending to small firms, but falls short of broad monetary easing, with the authority attaching requirements on how funds must be used.

"The ratio cut doesn't constitute broad monetary easing. But it does signal that - despite the recent strength of the official data - policymakers are starting to balance concerns about economic conditions alongside their longstanding desire to contain credit risks," said Mark Williams, chief Asia economist at Capital Economics. That was echoed by UBS Securities, which added that recent market turmoil and fragile sentiment amid rising trade frictions may be a minor policy concern.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.43 per cent, while Japan's Nikkei index closed up 1.42 per cent.

At 07:16 GMT, the yuan was quoted at 6.2881 per U.S. dollar, 0.04 per cent weaker than the previous close of 6.2855.

The largest per centage gainers on the main Shanghai Composite index were Keda Group Co Ltd up 10.05 per cent, followed by China National Software & Service Co Ltd gaining 10.01 per cent and Xiangtan Electric Manufacturing Co Ltd up by 10.01 per cent.

The largest per centage losers on the Shanghai index were Harbin Air Conditioning Co Ltd down 9.99 per cent, followed by Cultural Investment Holdings Co Ltd losing 9.63 per cent and Lawton Development Co Ltd down by 8.64 per cent.

As of 07:17 GMT, China's A-shares were trading at a premium of 22.96 per cent over the Hong Kong-listed H-shares.