China's major tech shares climbed about 2% on Tuesday after Beijing cut its benchmark lending rates for the first time in seven months, according to a Tuesday announcement by the People's Bank of China.

Alibaba (NYSE:BABA) led gains among internet giants, rising about 2% after the one-year prime rate fell to 3.0% from 3.1%. JD.com (NASDAQ:JD) and Baidu (NASDAQ:BIDU) also added roughly 2%, buoyed by hopes of cheaper corporate and consumer borrowing.

Warning! GuruFocus has detected 3 Warning Signs with BABA.

The central bank trimmed its one-year loan prime rate by 10 basis points and its five-year rate by the same amount to 3.5%, aiming to spur a struggling economy still feeling pandemic aftershocks and trade-war pressures.

Mortgage borrowers could see relief after the five-year rate cut, while businesses stand to benefit from lower financing costs. Analysts predict further cuts this year, with some forecasting another 40-basis-point reduction by December.

The rate moves lifted broader markets too: Hong Kong's Hang Seng index closed up 1.5% and mainland Chinese benchmarks also advanced.

With China targeting 5% GDP growth in 2025, these small but symbolic rate cuts may signal Beijing's willingness to deploy more monetary tools to shore up growth.

This article first appeared on GuruFocus.

View Comments