China stocks down despite RRR cut

Chinese stocks ended in negative territory on Thursday, giving up gains in morning trading that were boosted by the central bank's decision to cut banks' reserve requirement ratio (RRR).

The benchmark Shanghai Composite Index fell 1.18 percent to end at 3,136.53 points. The Shenzhen Component Index shed 0.46 percent to end at 11,065.58 points.

Total turnover on the two bourses grew to 632 billion yuan (103 billion U.S. dollars) from 534.41 billion yuan the previous trading day.

The People's Bank of China (PBOC) announced on Wednesday that it would lower banks' RRR by 50 basis points from Thursday.

The PBOC also increased support to some targeted areas, cutting the RRR by an extra 50 basis points for qualified city and rural commercial banks engaged in proportionate lending to small firms, the farming sector and major water projects.

According to estimates by U.S. investment bank J.P. Morgan and some Chinese institutions, the RRR cut could inject 650 billion yuan (104 billion U.S. dollars) into the real economy.

Gao Xiang, an analyst with CITIC Securities, is optimistic about the stocks market's future performance. "A cut in bank reserves will benefit the market in the long run. Today's fluctuation was temporary and market lows are good chances for midline investors to jump aboard."

The media and entertainment as well as electronics sectors led the gains. Hubei Radio & Television Information Network Co., Ltd and Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd both rose by the daily limit of 10 percent. Jiangsu Zhongtian Technology Co., Ltd. added 3.85 percent to 18.34 yuan.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, rose 0.94 percent to end at 1,774.31 points.