PBOC leaves its MLF rate unchanged, Chinese stocks selling off to lowest levels since 2016

The Peoples Bank of China has left its MLF rate unchanged which has weighed on Chinese stocks in the open as a 5 to 10 basis point cut was priced in. 

China's central bank was expected to roll over maturing medium-term policy loans and cut borrowing costs for the second time this year, a Reuters poll showed on Monday, as the a fresh wave of coronavirus infections weighs on the broader economy.

Reuters reported that twenty-nine out of the 49 traders and analysts, or 59% of all participants, predicted a reduction to the interest rate on one-year medium-term lending facility (MLF) when the central bank is set to renew 100 billion yuan ($15.75 billion) worth of such loans on Tuesday.

Meanwhile, China’s government has ordered a province of 24 million people into lockdown as it tries to contain the new outbreak that has spread to multiple locations. The risk to markets is that the lockdowns could trigger shock waves across global supply chains. 

At the time of writing, the Hang Seng Index is down 3.82%, marking the lest levels since 2016: