Central bank Governor Zhou Xiaochuan said this month that the PBOC will stick to prudent monetary policy to ensure reasonable growth in money and credit. China will conduct liquidity operations as needed and push forward with market-based interest-rate reforms, he said.

A major purpose of the injections “is to boost confidence in the financial markets, especially the A-shares listed in Shanghai,” Ting Lu, Bank of America Corp.’s head of Greater China, said in a note to clients yesterday. In order to ensure a smooth start to a much-anticipated trading link between Hong Kong and Shanghai, authorities “will have to deliver a stable A-share market,” he wrote.

Subdued inflation figures released this week give the bank more room to further ease monetary policy. The PBOC cut the interest rate it pays lenders for 14-dayrepurchase agreements for the second time in a month this week.

David Fuller's view

China may not be for everyone but it remains an interest stock market.

Although GDP growth has slowed, China is still the world’s fastest growing significant economy.  Moreover, the government is increasing the monetary stimulus introduced earlier this year.  China also has some of the most attractive valuations for a diversified economy.  The Shanghai A-Share Index currently trades a p/e of 11.27 and yields 2.88%, according to Bloomberg.  The Hong Kong Hang Seng Index has a p/e of 10.03 and yields 3.91%.  Moreover, China’s stock market does not have the leverage (margin debt) that we have recently seen on Wall Street.