Chinese stocks, fresh from suffering two massive weekly declines in a row, are about to resume trade.
Over the weekend China’s central bank, the PBOC, cut benchmark one-year borrowing and deposit rates by 0.25% and reduced the reserve ratio requirement for some banks by an additional 0.50%.
The move, in many people’s eyes, is seen as an attempt by policymakers to stymie the heavy losses seen in Chinese stocks over the past two weeks.
The chart below shows the 12-month performance of the benchmark Shanghai Composite index, along with the CSI 300 and ChiNext.
While the latter two are now in official bear market territory, suffering a loss of more than 20% from their 2015 highs, over the past year all three have still rallied by more than 100%.
Will additional monetary policy easing stem the losses, or will they merely accelerate from here.
We’re about to find out.
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