Chinese EV Stocks Soar Amid USD114 Billion Stimulus from Central Bank

Hong Kong-listed Chinese automakers surged on Tue after the People's Bank of China (PBOC) announced several better than expected key measures to stimulate the economy and support liquidity.

The financial stimulus of at least 800 billion yuan (USD113.7 billion) is the strongest one since the Covid-19 pandemic four years ago.

Pan Gongsheng, governor of the People's Bank of China (PBOC), said the central bank will set up a swap facility for securities, fund, and insurance firms allowing eligible institutions to access liquidity from the central bank by pledging assets.

Pan said the policy is expected to significantly improve these institutions' ability to raise funds and increase their shareholdings.

The central bank announced a 50 basis point cut to the reserve requirement ratio (RRR), allowing banks to hold less cash in reserve and freeing up funds for lending and investment.

The Governor also signaled the possibility of further RRR cuts, potentially ranging from 25 to 50 basis points before the end of the year, depending on economic conditions.

In addition, the PBOC revealed a 20 basis point reduction in the 7-day reverse repurchase (repo) rate, a stronger-than -expected move aimed at boosting liquidity in the financial system.