China's Bank of Communications. Photo: Wikimedia.

The ATF ALLINDEX Corporates, Financial and Local Governments rose on Monday as China’s central bank rolled over maturing loans by injecting 700 billion yuan ($101 bn) into the financial system.

The amount exceeded market expectations as it is larger than the two Medium-Term Lending Facilities (MLF) loans maturing this month, which amount to 400 billion yuan ($57bn) maturing on 17 August, and a further 150 billion yuan ($21.6bn) maturing on 26 August.

The ATF ALLINDEX Corporates rose 0.04%, while the ATF ALLINDEX Local Government and Financial climbed 0.03% and 0.02% respectively.

The MLF is a funding channel that allows the central bank to inject liquidity into the banking system and influence interest rates for longer-term loans. It launched Monday’s CNY 700 billion- one-year MLF at a rate of 2.95%, a level unchanged since April this year. The move signals that the Loan Prime Rate will also be kept on hold on 20 August.

The Shanghai Composite Index responded to the stimulus measure by surging 2.34%, with financial institutions leading the gains. China Merchants Securities stocks rose 10%, while those of China Life Insurance climbed 9.99%.

Within the ATF ALLINDEX Financial, the biggest gains were seen in the bonds of Haitong Securities (0.13%), Bank of Communications (0.09%), and Huatai Securities (0.06%). China Merchants group, a constituent of the flagship China Bond 50 but not of the ATF ALLINDEX Financial, climbed 0.28%, posting the biggest increase of the index.

However, overall the flagship China Bond 50, along with the ATF ALLINDEX Enterprise, slumped 0.05% and 0.06% respectively on the back of a coupon payment by China State Construction Engineering Corporation. Its bonds lost 4.34%.

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This report appeared first on Asia Times Financial.