Did the Chinese central bank just embark on a quantitative easing program over the weekend after months of dismal economic data that has threatened global growth?
Over the weekend, China announced fresh stimulus by injecting liquidity into the economy, and investors are hopeful that more could be on the way. The People's Bank of China will expand a program that allows banks to escalate lending by permitting those banks to increase their borrowings from the central bank by pledging assets.
A subtle form of quantitative easing, but quantitative easing nonetheless.
In addition, there was a guide higher by the Chinese central bank in the reference rate of the yuan against the U.S. dollar which many investors took to be a sign of confidence by the Chinese that the worst might be over in that beleaguered country.
The deputy governor of the People's Bank of China also reassured investors for the hundredth time that the selloff in Chinese markets is over and investors should start looking at investments there.
However, whether the officials are able to convince investors to step back in and begin buying remains to be seen. The U.S. dollar hit a low of $1=6.32 yuan at the end of trading in China today.
Tomorrow, the Chinese authorities will release its trade data for the month of September, which could spur additional liquidity measure announcements by the Chinese into their economy and stock markets. Economists are predicting that Chinese exports dropped by around 8% in September from year-ago levels vs. a 6% decline in August.
Adding to the feel-good cheer in that part of the world was news that China Reinsurance Corporation plans to raise $2 billion in an IPO in Hong Kong, which could mean the end to the ban on IPOs in China in effect since July of this year.
As a result of these developments, Chinese markets rallied to almost two-month highs today, with the Shanghai and Shenzhen indices both closing up by more than 3% on the day.
So before we count the Chinese markets out for good it might be worth our while to think again.