November 18, 2019 / 4:58 AM / 20 days ago

China, HK stocks rally as interbank lending rate cut stokes stimulus hopes

* SSEC 0.6%, CSI300 0.8%, HSI 1.1%

* HK->Shanghai Connect daily quota used 0.5%, Shanghai->HK daily quota used 2.6%

* FTSE China A50 +0.8%

SHANGHAI, Nov 18(Reuters) - China and Hong Kong stocks started the week on a strong note, as a cut in a key interbank lending rate on Monday stoked hopes of more stimulus measures to shore up the slowing economy.

** The CSI300 index rose 0.8%, to 3,908.22 points at the end of the morning session, while the Shanghai Composite Index gained 0.6%, to 2,908.12 points.

** The Hang Seng index added 1.1%, to 26,618.77 points, while the Hong Kong China Enterprises Index gained 1.0%, to 10,529.13 points.

** China’s central bank unexpectedly trimmed a key interbank lending rate on Monday, the first easing in the liquidity tool in more than four years and a signal to markets that policymakers are ready to act to prop up slowing growth.

** “I expected an easing move from the PBOC, just didn’t know when,” said a Hong Kong-based portfolio manager. “The (high) Consumer Price Index (CPI) was only pig CPI. Everything else is in big trouble.”

** China’s strongest consumer inflation in nearly eight years won’t deter the central bank from cutting a key interest rate next week, as slowing economic growth is a bigger concern for policymakers, traders and fund managers said.

** In Hong Kong, the economy sank into recession for the first time in a decade in the third quarter, government data confirmed on Friday, weighed down by increasingly violent anti-government protests and the escalating U.S.-China trade war.

** “Ending violence and restoring calm are pivotal to the recovery of the economy. The government will continue to closely monitor the situation and introduce measures as necessary to support enterprises and safeguard,” the government said.

** The Hong Kong government has rolled out stimulus measures since August, but since it is forced to keep a high level of reserves to back the Hong Kong dollar peg to the U.S. dollar, the packages have been relatively small.

** Investors were also eyeing developments in the Sino-U.S. trade talks.

** China and United States had “constructive talks” on trade in a high-level phone call on Saturday, state media Xinhua said.

** U.S. President Donald Trump had not yet agreed to remove any tariffs as part of a deal, and the size of China’s commitment to purchase U.S. farm products was not yet clear, Commerce Secretary Wilbur Ross said on Friday in an interview on Fox Business Network.

** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.32% while Japan’s Nikkei index was up 0.36%.

** The yuan was quoted at 7.011 per U.S. dollar, 0.05% weaker than the previous close of 7.0072.

** So far this year, the Shanghai stock index is up 15.94%, while China’s H-share index is up 3.0%. Shanghai stocks have declined 1.29% this month.

** As of 04:08 GMT, China’s A-shares were trading at a premium of 29.33% over the Hong Kong-listed H-shares. (Reporting by Luoyan Liu and John Ruwitch; Editing by Shailesh Kuber)

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