Stocks rise on ample liquidity
Analysts expect more policy easing to strengthen sentiment
Chinese stocks gained on Thursday hitting a one- week high, indicating improved market sentiment, boosted by government measures to stimulate the economy before the Chinese New Year holiday.
The benchmark Shanghai Composite Index rose 1.53 percent to close at 2781.02. The Shenzhen Component Index rose 1.6 percent while the startup index ChiNext gained 1.73 percent.
The rally was mainly led by a rebound in material and commodities producers, sparked by a jump in oil and commodities prices.
Hainan Mining Co Ltd rose by the daily 10 percent limit, while Jiangxi Copper Co Ltd soared by 5.8 percent.
Analysts said the market rebound indicated gradually improved investor sentiment after the monetary authorities continued to inject cash to ease liquidity pressure before the holiday and lowered the down- payment requirement for homebuyers to stimulate the sluggish property market.
The People’s Bank of China, the central bank, injected 80 billion yuan ($ 12 billion) into the market on Thursday through short- term lending tools to meet the surging cash demand before the Spring Festival break.
“Our monetary policy signal index, which is based on a set of economic and financial indicators, suggests a high likelihood of policy easing in February, which is mainly due to the forecast for possible capital outflows and slower growth,” said Yang Zhao, chief China economist at Nomura Securities.
The monetary authorities have reduced the minimum down- payment requirement to as low as 20 percent for first- time home buyers in cities that do not have restrictions on home purchases. The move has triggered a rally in property stocks.
“The PBOC’s latest moves reflect the government’s intention to reduce the housing inventory, particularly in low- tier cities,” analysts at ratings agency Moody’s Investors Service said in a research note.
“We expect the loosening of purchase and financing restrictions over the last 12 to 18 months to continue, which will support buyers’ sentiment and demand for properties.”
The improved sentiment was also highlighted by stock purchase by major sharehold- ers of listed companies.
So far this year at least 20 listed companies have announced plans to buy back their own shares to stabilize their stock prices.
The diminished expectation of a further depreciation in the yuan was also helping to improve investor sentiment, said experts, but uncertainty over China’s foreign exchange policy may continue to weigh on the market.
“The shift in global investor sentiment should be associated with diminished yuan depreciation expectations, which would lessen the need for intervention,” said Tim Condon, chief Asia economist at ING Bank.
But he noted that the risk associated with the measures to control capital outflows could weigh on sentiment in China’s financial markets.
Our monetary policy signal index ... suggests a high likelihood of policy easing in February ...” Yang Zhao, chief China economist at Nomura Securities