Chinese stocks were on track for a second straight day of gains ahead of a meeting of world leaders in Beijing for the One Belt, One Road Summit.
The CSI 300 Index, which tracks stocks listed in Shanghai and Shenzhen, was up 0.6% in late trade on Friday. It was the first time the index has advanced for two straight days in more than two weeks.
The advance came as Beijing prepares to host a number of world leaders, including Russian president Vladimir Putin, for a summit on China’s ambitious One Belt, One Road initiative to link China to Europe via Central Asia and maritime routes. The big summit comes as the U.S. and China unveiled a trade agreement that will boost U.S. exports of liquefied natural gas and beef, and work on improving access for electronic payment system providers in China.
The two day advance in the CSI 300 snapped an eight day losing streak. Investors and traders have been concerned about the impact on growth and asset values as China tightens monetary policy and seeks to deal with its debt levels. Chinese 10-year bonds have also sold off over the past two months, with yields rising from a low around 3.2% in March to 3.65%. Here’s a take on situation from Jefferies chief global equity strategist Sean Darby:
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Looking at some of the recent moves in commodity prices and the local CSI 300 index, it would be easy to construe that China is at the epicenter of global tightening. While the PBOC has certainly been altering its monetary policy, other factors such as a closer regulatory scrutiny of shadow financing and stock market investment funds are playing their part. But the sell off in Chinese bonds is only a normalization from very low yields.
There appears to be multiple forces acting at present in China. Separating the facts from the fiction is also not necessarily easy but in essence the introduction of new regulations for both banks and stock investment vehicles has come alongside natural policy tightening by the PBOC. Monetary policy moves in China are never really ‘tinkering’. The best analogy is similar to controlling a thermostat of a shower that either operates ‘hot’ or ‘cold’.
The focus next week will be on Monday’s release of Chinese economic data for April, including fixed asset investment and retail sales. Here’s what Shane Oliver, AMP Capital’s head of investment strategy and chief economist, is expecting:
Chinese economic activity data for April to be released on Monday is expected to show a slight softening after recent strength as tightening policies start to bring growth back into line with target. Expect to see growth in industrial production slow from 7.6% year on year to 7.1%, fixed asset investment slow to 9.1% (from 9.2%) but retail sales growth remain at 10.9%.
May 12, 2017 at 01:52PM
from Robert Guy
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