SHANGHAI stocks edged up this morning after the nation's central bank cut interest rates last night in its latest move to support economic growth.

The Shanghai Composite Index rose 0.14 percent, or 3.11 points to 2,296.24 points. Turnover stood at 38.2 billion yuan (US$6.1 billion) in the morning session.

The People's Bank of China announced late yesterday that it was cutting the benchmark interest rates by 25 basis points, with the one-year lending rate falling from 6.56 percent to 6.31 percent. The deposit rate dropped from 3.5 percent to 3.25 percent. Both rates take effect today.

This was the first cut since the global financial crisis in 2008. "The move is good for market confidence as it indicates policy makers are determined to maintain economic growth," said Qu Hongbin, chief economist for China at HSBC Holdings Plc, who expects more stimulus policies.

The central bank also offered lenders the flexibility to set the deposit rate to a maximum of 110 percent of the benchmark rate. The lending rate can be lowered to a minimum of 80 percent of the benchmark rate.

Brokerages led the market gains. Citic Securities, the nation's biggest listed brokerage, rose 1.1 percent to 13.30 yuan. Haitong Securities Co gained 2.1 percent to 10.35 yuan. Founder Securities Co added 1.9 percent to 5.29 yuan.

Poly Real Estate, the country's second largest developer, added 1.3 percent to 13.82 yuan. While China Vanke, the nation's biggest developer, shed 0.2 percent to 8.94 yuan.

Lenders lost on speculation the flexibility of interest rates may increase competition among banks. Industrial and Commercial Bank of China Ltd, the nation's largest lender, lost 0.48 percent to 4.17 yuan. China Construction Bank Corporation edged down 0.7 percent to 4.46 yuan.

Source:shanghaidaily