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Reflections #31 - China cuts the 1YR and 5 YR LPR

China eased monetary policy further after last week's MLF cut but underwhelms market expectations, which hoped for a bigger cut. The 1YR Loan Prime Rate (LPR) was cut to 3.55% and the 5YR to 4.2%.

Property related equity names traded weaker following the announcement as the cut is unlikely to give a bigger relief to the housing market. Most mortgage borrowers will only benefit beginning of next year and the cut is unlikely to revive the housing market as demand has been in the doldrums for longer as mortgage borrowers have chosen to prepay mortgages given the high funding costs. The 10bp cut is unlikely to change that materially.




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