The People’s Bank of China (PBOC) announced cuts in the one-year and five-year loan prime rates (LPR) by 10 basis points to 3.55 percent and 4.2 percent on June 20, 2023. The PBOC’s move aims to release liquidity and reduce the pressure from repayments. This move had been widely expected by the market after the PBOC announced a reduction in the reserve requirement ratio ( RRR). However, the cuts are lower than expected by market analysts, and so the outlook is still cloudy, especially for the slowing property market.
“The 10 bps rate cut[s] are unlikely to stimulate business confidence and housing demand,” stated Ken Cheung, chief foreign exchange strategist at Mizuho Bank, on CNN. The expectations of Goldman Sachs were for a cut in the five-year LPR (for new mortgages) by at least 0.15 basis points.
It is expected that the supportive measures, for the property sector as well, will continue in the coming months as the government aims to stabilize the economy after the weak data released for May.
Since the announced LPR cuts are not expecting to boost the property market much, sentiments in the steel and iron ore markets range from stable to bearish today. In particular, rebar and iron ore futures at Shanghai Future Exchange have settled 0.82 percent and 0.85 percent lower compared to June 19, respectively. Iron ore futures at Dalian Commodity Exchange have declined by 1.04 percent. “The market depends on demand and supply now in China. The fundamentals have not changed. I see the market as not being positive,” a Chinese steel trader said.