The Hang Seng Index surged by as much as 2.4% on Friday following the People’s Bank of China’s (PBOC) record injection of liquidity through its medium-term lending facility (MLF). The PBOC decided to maintain the interest rate at 2.50%, consistent with market expectations, when renewing maturing medium-term policy loans. The central bank kept the rate unchanged on 1.45tn yuan worth of one-year MLF loans to specific financial institutions.
China stocks surge after record liquidity injection
With 650bn yuan worth of MLF loans set to expire in December, the operation resulted in a net injection of 800bn yuan into the banking system, marking the most substantial monthly increase on record.
The positive momentum extended beyond financial markets, with Chinese property stocks rallying due to the extension of eased home-buying restrictions to Beijing and Shanghai. Investors believe this move will stimulate demand in the real estate sector.
Brokerages also saw gains after the China Securities Regulatory Commission (CSRC) committed to expediting the establishment of first-class investment banks and investment institutions.
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While the economic outlook appeared promising, there were signs of renewed weaknesses in key economic indicators. Retail sales, a vital metric for domestic consumption, grew by 10.1% year-on-year in November, surpassing October’s 7.6% but falling short of the 12.9% expected by economists. Moreover, retail sales contracted by 0.06% from the previous month.
Industrial production showed resilience, rising to 6.6% year-on-year from October’s 4.6%. Fixed-asset investment maintained a growth rate of 2.9% from January to November, consistent with the first ten months of the year. The urban surveyed unemployment rate in November remained stable at 5%, the same rate as in October.
