Shutterstock photo
Markets

Beijing’s reserve ratio cut a boon for commodities as well as banks (CICHY, DBC, JJC, BACHY)

Shutterstock photo

Shutterstock photo

The easing has begun in China with a 50 basis-point cut in the amount of money domestic lenders need to keep on hand. This effectively injects $55 billion back into the Chinese credit markets and gives companies plenty of cash to buy raw materials.

Institutions like Bank of China ( BACHY , quote ) and China Construction Bank ( CICHY , quote ) still need to tie up 21% of their assets in reserve, so there is still a lot of room here for further moves.

Coming alongside last week's move on the part of Western banks to halve the cost of borrowing in dollars, and you have plenty of liquidity out there.

As it is, commodities have lagged the rally -- until now. But with commodity-linked currencies like the Australian dollar back on the move today, we could be seeing the resource plays rejoining the party.

If Chinese consumers are flush with cash and back in the commodity markets, then look out, bears. Plus, cheaper dollars naturally push up commodity prices, so there is a double impact here.

Start with the big funds like DBC ( DBC , quote ) or, in copper, JJC ( JJC , quote ).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks