China is injecting $150 billion into the economy — that may fuel a short-term rally,

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China is injecting $150 billion into the economy — that may fuel a short-term rally, UBS says

• The People’s Bank of China is set to cut the reserve requirement ratio by 50 basis points for all banks, a move that will release around 1 trillion yuan ($154 billion) in long-term liquidity into the economy.
  
• “We think this broad-based RRR cut could boost market sentiment in the short term and improve stock market liquidity,” UBS analysts Lei Meng and Eric Lin wrote in a note on Monday.
  
• However, the market rally may be short-lived given concerns over the slowing economic growth, the bank indicated.
  

China’s move to cut the amount of funds banks need to hold in reserve could boost market sentiment — and that could be good news for stocks in certain sectors, according to investment bank UBS.


The People’s Bank of China said Friday it would cut the reserve requirement ratio (RRR) by 50 basis points for all banks, effective from July 15. The move is expected to release around 1 trillion yuan (or $154 billion) in long-term liquidity into the economy.

The reserve requirement represents the amount of money that banks must hold in their coffers as a proportion of their total deposits. A lowering of that required amount will increase the supply of money that banks can lend to businesses and individuals.

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