KUALA LUMPUR, April 11 (Bernama) -- The FTSE Bursa Malaysia KLCI (FBM KLCI) slipped into negative territory today to end the week on a subdued note, weighed down by selling in banking blue chips as investors continued to assess the global trade outlook. At 5 pm, the FBM KLCI fell 8.37 points, or 0.57 per cent, to 1,454.76 from Thursday’s close of 1,463.13. The benchmark index opened 21.47 points lower at 1,441.66 and retreated to a low of 1,434.92 during the morning session, before recouping its losses to hit a high 1,462.15 in the early afternoon session. Market breadth, however, was slightly positive with gainers surpassing decliners by 472 to 442. A total of 456 counters were unchanged, 993 untraded, and nine suspended. Turnover slid to 2.80 billion units valued at RM2.46 billion against 4.41 billion units valued at RM3.81 billion on Thursday.
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The People’s Bank of China (PBOC) has introduced a new monetary policy tool aimed at better managing liquidity in the financial system as the country faces ongoing economic pressures. This new measure, known as outright reverse repurchase agreements, will be conducted monthly with primary dealers for a duration of no more than one year, according to a PBOC statement on Monday.
The move is intended to maintain reasonable liquidity within the banking system and enrich the central bank's toolkit for fine-tuning the economy. Outright repos, a form of short-term borrowing in the money markets, will include sovereign bonds, local government notes, and corporate debt as eligible securities, the PBOC noted.
This new tool marks part of the PBOC's policy shift to operate more like global peers, allowing it to influence market borrowing costs more effectively. The central bank has increasingly relied on the seven-day reverse repo as its main policy lever, moving away from the medium-term lending facility (MLF).
According to Becky Liu, head of China macro strategy at Standard Chartered Bank, the introduction of outright repos could facilitate longer-term liquidity injections into the interbank market, helping banks to prepare for an expected rise in government bond issuance.
China’s financial institutions, both banks and non-bank entities, are experiencing funding stress as they head toward year-end, when seasonal cash demand often spikes. The PBOC’s actions come amid ongoing concerns over weak domestic demand and the country’s persistent property crisis. A broad stimulus package, including interest rate cuts and reduced reserve requirement ratios (RRR), has been in place since September.
With local governments expected to issue more bonds and the central government likely to increase treasury note issuance, the new tool will be crucial in offsetting the potential liquidity drain in the coming months. Commercial banks, which are the primary buyers of these bonds, will benefit from the increased liquidity.
This new tool is expected to complement the PBOC's existing operations, including seven-day reverse repos, MLF, and government bond trading, according to a report in the Shanghai Securities News. The PBOC will likely conduct three- or six-month outright reverse repo operations to manage liquidity needs during the maturity of 1.45 trillion yuan (US$204 billion) in MLF loans due in November and December.
The introduction of this tool reduces the likelihood of an RRR cut, as it provides the PBOC with more flexibility in managing liquidity via bonds, according to Frances Cheung, a strategist at OCBC.
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