People’s Bank of China and Loan Prime Rate

On Thursday, mainland Chinese stocks benefited from the decision of the People’s Bank of China. The country’s central bank decided to cut its loan prime rate (LPR). China is struggling to deal with the economic impact of a coronavirus outbreak.

The Shanghai Composite rose 1.84% to around 3,030.15. At the same time, the Shenzhen composite gained 2.152% to about 1,886.14. The Shenzhen component gained 2.43% to 11,509.09.

Hong Kong’s Hang Seng index declined by 0.28% as of its final hour of trading.

Japan’s Nikkei 225 gained 0.34% to 23,479.15. Meanwhile, the Topix index rose 0.16% to 1,674.48.

South Korea’s Kospi index fell 0.67% to 2,195.50.

Australia’s S&P/ASX 200 added 0.25% to close at 7,162.50. The country’s unemployment rate increased on a seasonally adjusted basis in January. According to the Australian Bureau of Statistics, seasonally adjusted unemployment rate in January rose to 5.3% from a reading of 5.1% in December.

On February 19, shares of airline Qantas jumped 5.87% following the company’s announcement that it was adjusting its capacity to Asia. Qantas changed its capacity until at least late May.

China and the impact of the coronavirus outbreak

The People’s Bank of China made the decision to reduce the lending benchmark rate on Thursday. The central bank cut the loan prime rate (LPR) by ten basis points. Moreover, the country’s central bank also changed the 5-year LPR by five basis points.

Several days ago, the central bank also reduced the rate of medium-term loans. Country’s central bank lowered the rate on 200 billion-yuan ($28.65 billion) worth of one-year medium-term lending facility loans to financial institutions. The bank decreased the rate from 3.25% to 3.15%.

Ongoing coronavirus is a serious challenge for the local economy. Authorities are trying to contain the spread of this virus. Officials imposed restrictions to tackle this problem. However, it will take time to reassure the investors that the local economy has the ability to overcome economic issues.