“This is another targeted easing measure,” Chang Jian, chief China economist at Barclays Plc, wrote in a July 30 report. While the loan doesn’t represent “broad loosening,” it has “reduced recent market concerns about a shift in the PBOC’s stance away from easing towards neutral or tightening,” she said.

Wang Tao, UBS AG’s chief China economist, says the measure is part of trying to “optimize” the implementation of its existing monetary stance, and doesn’t constitute a shift in policy, according to a July 24 report.

In its Aug. 1 report, the PBOC said targeted measures have become a “new trend of major central banks” since the global financial crisis started and that it will keep using tools such as relending and rediscounting to guide institutions to “optimize their credit structure.”

?The CDB loan is the equivalent of an across-the-board cut of 1 percentage point in the ratio of deposits banks must hold as reserves, JPMorgan Chase & Co. estimated, scrapping its forecast for two 50 basis-point cuts from the current 20 percent reserve requirement ratio for large banks.

Eoin Treacy's view

Despite attractive valuations, the Chinese stock market has been in need of a bullish catalyst. Continued largesse on behalf of the central bank in supporting infrastructure projects represents an important tailwind. The size of the loans will be viewed as a positive by the banking and brokerage sectors that will benefit from lending fees and the deals that will go with it. Considering their dominant weighting in the main indices this can be viewed as at least part of the reason for the recent strength in the A-share market.    

Hong Kong listed Citic Securities extended its short-term rally towards the upper side of its 18-month range and while some consolidation in the region of the HK$21 is possible a sustained move below the 200-day MA, currently near HK$17.50, would be required to question medium-term scope for additional upside. 

Meanwhile the Shenzhen B-Shares Index is breaking out ot new all time highs.