Feb 18, 2020 (China Knowledge) - Yesterday the People's Bank of China (PBoC) launched a RMB 200 bln Medium-term Lending Facility (MLF) and RMB 100 bln seven-day reverse repo operation to hedge the impact of the central bank's reverse repo expiration to maintain sufficient liquidity in its banking system.
To be specific, the bid-winning rate of MLF operation registered 3.15%, down 10 basis points from the previous bids; the yield on the seven-day reverse repo operation recorded 2.4%, unchanged from previous round. Due to yesterday's RMB 1 trln of reverse repurchase maturity, the central bank realized a net withdrawal of RMB 700 bln.
After the announcement, A-shares rose sharply. The Shanghai SE Composite Index was up 2.28% at 2,983; Shenzhen SE Composite Index was up 2.98% to 11,241, while the ChiNext Index increased 3.72% to 2,146. The total market capitalization of all listed companies in A-shares market reached RMB 66.09 trln, up by RMB 1.608 trln from last trading day on Friday (Feb 14).
It is interesting to note that, on the last trading day before closing for week-long Lunar New Year Festival that began on Jan 23, A-shares market capitalization was RMB 64.45 trln, it is evident; at least, in the near term, that the China’s stock market have returned higher before the nationwide quarantine and measures taken to contain the coronavirus on Feb 3.
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