China shares end mod­estly higher be­fore oil slips

The Pak Banker - - MARKETS/SPORTS -

Chi­nese shares be­gan the week on a firmer note on Mon­day, ex­tend­ing gains from Fri­day af­ter a rally in bat­tered oil prices sparked a rise in Asian eq­ui­ties.

The bench­mark Shang­hai Com­pos­ite In­dex .SSEC closed up 0.8 per­cent, while the CSI300 in­dex . CSI300 of the largest listed com­pa­nies in Shang­hai and Shen­zhen added 0.5 per­cent, build­ing on gains of more than 1 per­cent on Fri­day as oil bounced off 12-year lows. Af­ter surg­ing 10 per­cent on Fri­day and help­ing Wall Street rise over 2 per­cent, oil held gains dur­ing the Asian day on Mon­day, though they slipped back af­ter Chi­nese mar­kets closed.

China's fickle stock mar­kets have slumped 16-17 per­cent so far this year on con­cerns about the slow­ing econ­omy and con­fu­sion over the cen­tral bank's for­eign ex­change pol­icy, with thin trad­ing vol­umes re­flect­ing a lack of in­vestor con­fi­dence and ex­ag­ger­at­ing the volatil­ity.

Chas­tened by the mar­ket's bear­ish re­ac­tion to an early Jan­uary de­pre­ci­a­tion in the yuan, the Peo­ple's Bank of China (PBOC) has kept the yuan's daily mid­point fix­ing CNY=SAEC lit­tle changed for the past two weeks. Spot yuan was at 6.5794 on Mon­day, just a few pips away from Fri­day's close, while off­shore it firmed to 6.6110, about 0.5 per­cent weaker than the on­shore rate.

"As the (yuan) ex­change rates calm af­ter re­cent in­ter­ven­tions, stocks are likely to sta­bi­lize, and can even stage a tech­ni­cal re­prieve in the near term," Hao Hong, man­ag­ing di­rec­tor of re­search at BOCOM In­ter­na­tional said in a re­port.

"Re­cov­er­ing oil prices amid the epic (U.S.) snow storm will also help, and non­com­mer­cial traders have al­ready cut their bets," he said, warn­ing that the weaker over­all trend had not yet ended.

China's first ini­tial pub­lic of­fer­ing un­der new rules to make list­ing eas­ier got off to a storm­ing start on Mon­day, with in­vestors ap­ply­ing for more than 4,000 times the num­ber of shares on of­fer. That en­thu­si­asm is likely to re­main con­fined to IPOs, how­ever, which in China have typ­i­cally been one-way win­ning bets.

Many in­vestors have lost the stom­ach for the mar­ket af­ter a wild ride since last sum­mer, when stocks crashed 40 per­cent. Bei­jing in­ter­vened to stop that crash and or­ches­trate a re­cov­ery of sorts, but any­one who mis­took that for a bot­tom and bought in will have lost their shirt again in Jan­uary.

John Gan, an of­fice clerk who said al­most half of his in­vest­ment had evap­o­rated since Au­gust, is among those giv­ing the bourses a wide berth now.

"We're al­ready in a bear mar­ket. Two steps for­ward is fol­lowed by three steps back­ward. Any re­bound would be used by in­vestors as a chance to cut their equity ex­po­sure," he said.

In­vestors re­main wary about fur­ther weak­ness in the yuan, too, de­spite as­sur­ances from Bei­jing that it has no in­ten­tion of push­ing it lower to gain a com­pet­i­tive ad­van­tage. The cen­tral bank has jolted global fi­nan­cial mar­kets twice in six months by al­low­ing sharp, sud­den slides in the cur­rency, only to step in ag­gres­sively to sta­bi­lize it. That in­ter­ven­tion has, for now, chased away most of the spec­u­la­tors. "Short sell­ing of the yuan has al­most dis­ap­peared so trad­ing was rel­a­tively thin," said a dealer at a for­eign bank in Shang­hai. Fi­nan­cial mar­kets need "clar­ity and cer­tainty" about how Chi­nese au­thor­i­ties are man­ag­ing their cur­rency, Chris­tine La­garde, the man­ag­ing di­rec­tor of the In­ter­na­tional Mon­e­tary Fund, said on Satur­day.

The de­cline in China's yuan and stock mar­kets on con­cerns about the coun­try's slow­ing growth have fu­eled a flight of cap­i­tal out of the world's se­cond-largest econ­omy which pol­i­cy­mak­ers are strug­gling to con­tain.

There were more signs of weak­ness in China's econ­omy on Mon­day, as the Min­istry of Fi­nance said profit fell at state firms last year, and Ja­pan re­ported that ex­ports to China, its big­gest trad­ing part­ner, were down for a fifth straight month.

Other stock mar­kets in Asia also rose on Mon­day, with Ja­pan's Nikkei . N225 nudg­ing 0.9 per­cent higher and MSCI's broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan . MIAPJ0000PUS up 1.1 per­cent, helped by ex­pec­ta­tions that global cen­tral banks, in­clud­ing the Peo­ple's Bank of China, will ease mon­e­tary pol­icy fur­ther if needed.

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