Rate cut fuels shares to 3-year high

Shanghai stocks skyrocketed to a three-year high yesterday as investors cheered an interest rate cut by the Chinese central bank and pursued securities and property counters.

The Shanghai Composite Index rose 1.85 percent to 2,532.88 points — the highest close since September 1, 2011.

The People's Bank of China on Friday unexpectedly announced the cut in interest rates, the first time since July 2012 it has done so. The one-year lending rate was reduced by 40 basis points to 5.6 percent, while the one-year deposit rate was cut by 25 basis points to 2.75 percent.

The move was perceived as injecting new vigor in the slowing economy. Huarong Securities said the cut in the interest rate will trim financing cost.

Brokerages rose. China Merchants Securities and Founder Securities surged by the daily limit of 10 percent to 16.34 yuan (US$2.67) and 8.13 yuan. Industrial Securities rose 9.85 percent to 10.15 yuan.

Huatai Securities said the cut will trim an individual buyer's monthly mortgage payment by 6.8 percent, which will stimulate property transactions.

Poly Real Estate and Gree Real Estate rose by the daily limit of 10 percent to 6.47 yuan and 16.61 yuan, while Shanghai Lujiazui Finance & Trade Zone Development jumped 9.99 percent to 32.27 yuan.

Banks were mixed on worries the asymmetric rate cuts — big for lending and small for deposit — will lead to weaker earnings.

The Agricultural Bank of China declined 0.39 percent to end at 2.56 yuan but China Construction Bank rose 0.47 percent to close at 4.24 yuan.