The People's Bank of China (PBOC) announced yesterday to cut China's interest rate and to reduce bank's Reserve Ratio Requirement (RRR). This is the 6th time China reduced interest rate since November 2014 to stimulate economy.
When the news was released on Friday, DJIA futures rose more than 100 points before market opened and night market for Hang Seng Index futures surged up; closed at 23460 (+280).
We think the news is positive for Chinese bank shares and we believe the top four Chinese banks listed in Hang Seng Index-- China Construction Bank (CCB), Industrial and Commercial Bank of China (ICBC), Bank Of China (BOC) and Bank of Communications will lead the surge on Monday.
DJIA closed +157 on Friday while Hang Seng Index closed +306 @ 23151.94. We see Hang Seng Index will move higher on Monday because of this news and we see resistant at 23880. October futures closed at 23180 (+336); range of the week for October futures traded between 22710-23289 (579). Since next week is final week of October and it is rollover week for spot and next month futures contract, we see support for HSI at 22850. Further support 22450.
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