China shares tumble despite central bank's move to aid economy

China pumps USD 109 billion into economy as trade war bites on growth

"This is a sign of policy easing to counter (the effects of) the US-China trade war and shows (Beijing's) determination to maintain growth", said Liao Qun, chief economist of China Citic Bank International. "All news is against it", Fraser Howie, an independent analyst who has written books about China and its financial system, told CNBC's "The Rundown" on Monday.

The Central Bank of China declared on Sunday that it was clipping the reserve requirement ratios (RRRs) by one percentage point from 15 October to lower the financing costs and encourage growth in the world's second-largest economy.

Asian markets fell on Monday, extending last week's sell-off as another strong U.S. jobs reading further fanned expectations the Federal Reserve will hike interest rates at a quicker pace.

The Chinese mainland's stock markets and the onshore yuan exchange rate both fell yesterday, the first day back after the week-long National Day holiday and the same day the central bank unveiled plans to lower the reserve requirement ratio. That said, amid a worsening trade-war outlook, negative sentiment around China's economy and a surging USA dollar could yet test the nation's defenses.

However, the move has already faced heavy criticism from a number of analysts.

But an intensifying tit-for-tat increase in tariffs by the United States and China has sparked fears that China's export-oriented economy may grow at a substantially slower rate than had been expected, prodding the authorities to order economic stimulus measures.

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The losses in China also came despite a cut in the amount of cash the country's commercial banks must keep in reserve, which its central bank says will pump more than $100 billion into financial markets.

The RRR cut, announced on the last day of China's week-long national day holiday, indicates that the central bank is anxious about the impact of "external shocks" to markets such as a speech last week by United States vice-president Mike Pence, said Zhang Yi, chief economist at Zhonghai Shengrong Capital Management. The rest of Asian markets fell on Monday, extending last week's sell-off. Markets in Japan are closed for a holiday.

But the RRR cut did little to calm nerves when stock markets in Greater China stumbled at the start of the week's trading. The losses in NY seeped into Asia, where Shanghai sank 3.7 percent, while Hong Kong lost 1.4 percent in the afternoon with property firms hit by expectations the city's banks will lift mortgage rates again as they track a likely Fed hike. "There is so much headwinds towards it now and I think it's right to prepare for the worst and expect the best", Gareth Nicholson, head of fixed income at Bank of Singapore, told CNBC's "The Rundown" on Monday.

"Some regions and companies have been hit (by trade frictions), but China has the ability to minimize the impact", Liu was quoted as saying.

"He can worry about the debt problems three, four, five years down the line", Nicholson said.

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