The Sunday News
Hong Kong – Chinese stocks headed for their biggest weekly gain this year as liquidity injections by the central bank and a stronger yuan helped stem the worst equity rout among global markets.
The Shanghai Composite Index has risen 1.4% this week, set for the best weekly increase since the period ended December 18. It slid 0.2% to 2 776.31 at 1:28 p.m. local time. Shandong Gold Mining led advances for materials stocks, while Sinopec Shanghai Petrochemica paced gains among energy companies. The Hang Seng Chinese Enterprises Index added 1.5%, paring this week’s loss to 1.8%.
The People’s Bank of China injected 330bn yuan ($50bn) into the banking system this week, adding to last month’s injection of 2trn yuan as policy makers moved to ease a cash shortage before the weeklong lunar new year holidays starting on February 8. The yuan in Hong Kong is set for its fourth weekly gain, the longest run of advances since October 2014.
China relaxed restrictions on foreign funds as policy makers seek to gain entry to MSCI’s global stock indexes and bolster the nation’s financial markets after record capital outflows.
“Trading remains light as most retail investors in China are leaving the cities and going to their home towns for the holidays,” said William Wong, head of sales trading at Shenwan Hongyuan Group in Hong Kong. “The new measure announced yesterday is positive to China as it encourages longer-term funds to increase investment.”
The CSI 300 Index fell 0.4%, paring this week’s gain to 1%, while Hong Kong’s Hang Seng Index rose 0.8%, trimming this week’s loss to 1.7%. Trading volumes in Shanghai were 31% below the 30-day average before the holiday. Mainland markets will resume trading on February 15.
Buoyed by bullion prices set for the biggest weekly gain in a month, Shandong Gold rallied 9.6%, propelling a gauge of commodity producers to the biggest advance among industry groups. Sinopec Shanghai added 2.4%, sending energy companies higher.
In Hong Kong, China Pacific Insurance Group and China Life Insurance added at least 2.5%, leading financials higher. Bank of Communications Chief Economist Lian Ping said in a Shanghai briefing that PBOC may cut banks’ reserve requirement ratios after the Chinese New Year holidays.
A measure of property stocks in Shanghai rose 1.3% this week after China on Tuesday allowed commercial banks to cut the minimum mortgage down payment for first-home purchases to 20% from 25% and to 30% from 40% for second homes, except in five cities with home-buying restrictions.
The State Administration of Foreign Exchange said fund managers approved under its Qualified Foreign Institutional Investor program will no longer need to apply for quotas, with maximum allocations instead being linked to assets under management and subject to a ceiling of $5bn. Open-ended funds will also be able to shift money in and out of the nation’s stocks on a daily basis.
The benchmark gauge has slumped 21% this year, the world’s worst-performing global index, amid concern that the economy’s slowdown and the yuan’s depreciation will continue to exacerbate capital outflows. Data due Sunday may show China’s foreign exchange reserves declined by a record $118bn in December to $3.21trn, according to the median forecast in a Bloomberg survey.
The offshore yuan fell less than 0.1% to 6.5781 a dollar in Hong Kong, taking this week’s gain to 0.24%.
Traders reduced their bets on stocks purchased with borrowed money for a second day on Thursday, with the outstanding balance of margin debt on the Shanghai stock exchange dropping 0.4% to 524.3bn yuan, the lowest level since November 27, 2014.-Bloomberg
