PBoC cut both rates and RRR after stock market plunge

In a seemingly emergency move, the PBoC announced 25bp benchmark rate cut on Saturday, combined with targeted RRR cuts, effective 28 June. The timing - after Friday's 7.4% plunge in SHCOMP, and magnitude - the first such combined move from the central bank since late 2008 the global financial crisis, highlight the government's concern about a stock market crash and rising systemic financial risks. While many had expected a government rescue after the market plummeted, the combined move has exceeded expectations. The move will help to stablise market sentiment and lend support to property sales and economic growth in H2 2015.

"We maintain our view of one more benchmark rate cut of 25bp in Q3, accompanied by a removal of the deposit rate ceiling, and look for 1-2 50bp RRR cut in H2 2015, depending on liquidity conditions",says Barclays