China stock futures jump in Singapore after rate cut; yuan drops

[HONG KONG] China's stock-index futures jumped in Singapore after the central bank cut interest rates following the biggest stock rout in almost two decades. The offshore yuan weakened the most since April.

FTSE China A50 Index futures for July delivery climbed 1.8 per cent in Singapore at 9.04am. The Shanghai Composite Index tumbled 7.4 per cent on Friday to a seven-week low, extending its drop from this year's peak to 19 per cent, on the cusp of a bear market. The gauge's 10-day volatility reading jumped to 60, the highest since November 2008. The yuan slipped 0.13 per cent to 6.2137 versus the greenback in Hong Kong, according to data compiled by Bloomberg.

"Chinese equities will receive a strong boost from the PBOC rate cuts," said Bernard Aw, a Singapore-based strategist at IG Asia Pte. "But I feel that any rebound may be short-lived with the Chinese markets transitioning to a consolidation phase. The consolidation period should continue because of an expected moderation in margin debts."

Stocks have tumbled as as investors who use borrowed money to buy equities cut holdings amid concern valuations were unsustainable.

The benchmark equity gauge had surged more than 150 per cent in the 12 months prior to its June 12 peak.

The People's Bank of China announced June 27 a 25 basis point cut in the benchmark lending rate, while required reserve ratios for some lenders also will be reduced.

BLOOMBERG