China Markets Live - China stocks jump most in two months after GDP data, stimulus eyed
China posts weakest economic growth in 25 years; analysts see more stimulus coming
Welcome to the SCMP’s live China markets. The intense volatility in Chinese markets into 2016 due to the implementation of the circuit breaker has roiled world financial markets. Investors are increasingly focused on the broader question of how this episode might affect the wider economy of the country. We’ll bring you the key levels, trading statements, price action and other developments as they happen.
Here is a summary of market movements so far today:
- Shanghai Composite closes up 3.2 per cent, the biggest daily percentage gain since Nov. 4
- Shenzhen Composite finishes 3.6 per cent higher
- Hong Kong’s Hang Seng climbs 2.1 per cent at close
- China’s GDP grows 6.9 per cent in 2015, slowest in 25 years, fueling talk of further stimulus from the Chinese government
5:01 pm By Laura He
Elsewhere in Asia, major stock indexes posted a modest rebound in afternoon trade, after China’s weak economic data prompted hopes for further policy support. Tokyo’ Nikkei Average ended up 0.6 per cent to 17,048.37, Sydney’s S&P/ASX 200 settled 0.9 per cent higher at 4,903.10, and Seoul’s Kospi Composite Index added 0.6 per cent at 1,889.64.
India’s Sensex advanced 1.1 per cent to 24,449.84 in afternoon trade.
Meantime, oil prices rebounded in Asia trade on Tuesday, as February WTI crude rose 0.8 per cent to US$29.65 a barrel, and March WTI crude was also up 0.9 per cent to US$30.66 a barrel. March Brent crude climbed 2.6 per cent to US$29.3 a barrel.
4:29 pm By Xie Yu
Hong Kong markets closed with solid gains. The Hang Seng Index ended up 2.07 per cent, or 398.36 points higher at 19,635.81. WThe H-share Index, tracking mainland based companies, also rallied 2.99 per cent, or 242.99 points, to 8,377.80.
3:20 pm By Laura He
See how China’s economic slowdown could affect the rest of world in one chart by investment strategist Callum Thomas.
Here is what slower China GDP growth means for RoW pic.twitter.com/4uJDgYb7P9
— Callum Thomas (@Callum_Thomas) January 19, 2016
3:12 pm By Xie Yu
The mainland markets recorded their best performance in two months on Tuesday, as the Shanghai Composite Index jumped 3.22 per cent, or 93.90 points to end at 3,007.74. The CSI300 Index advanced 2.95 per cent, or 92.40 points to 3,223,13.
The Shenzhen Composite Index gained 3.57 per cent, or 65.42 points to 1,895.75. The Nasdaq-style ChiNext Index also rallied 3.07 per cent, or 66.76 points to 2,241.70.
2:28 pm By Laura He
China’s weak economic data may prompt further policy easing from the central government, Barclays said Tuesday.
“The soft activity data, the domestic market selloff and unsettled global financial markets require macro policies to stay accommodative for an extended period, in our view,” economists at Barclays said in a note.
On the monetary policy front, they predicted two 25 basis-point benchmark rate cuts and two required reserve ratio cuts in the first half of this year.
In regard to the fiscal policy, they expected a widening of fiscal deficit and more targeted fiscal stimulus to support consumption and infrastructure investment, as well as more reductions in corporate taxes and fees.
The British bank forecast a 6 per cent growth for China’s GDP in 2016, with further moderation in real estate investment growth and a further slowdown in Fixed-asset investment growth in 2016.
However, the bank said consumption growth will remain a “bright spot”, given Chinese middle-class consumption upgrading.
2:01 pm By Xie Yu
The mainland markets expanded gains after lunch break. The Shanghai Composite Index advanced 2.91 per cent, or 84.67 points to 2,998.51 by 1:45 pm. The CSI300 Index rose 2.71 per cent, or 84.93 points to 3,215.66.
The Shenzhen Composite Index gained 2.66 per cent, or 48.71 points to 1,879.04. The Nasdaq-style ChiNext Index added 2.05 per cent, or 44.60 points to 2,219.54.
Hong Kong markets also traded higher. The Hang Seng Index rose 1.24 per cent, or 238.50 points to 19,475.95. The H-share Index, tracking mainland based companies, gained 2.23 per cent, or 181.02 points to 8,315.83.
1:52 pm By Xie Yu
Tom Rafferty, Asia economist for Beijing-based The Economist Intelligence Unit, said:
“Consumers came to the rescue of China’s economy in 2015. They shrugged off stock market volatility in mid-2015, with consumption growth accelerating in the second half of the year. Consumer spending helped to offset weaknesses in industry and investment - the traditional drivers of the Chinese economy - and was the major factor in the achievement of the government’s growth target of ‘about 7 per cent’.
However, the EIU are sceptical about the sustainability of China’s two-speed economy. Industrial problems are giving rise to recent labour market stress. Weaker wage growth would have a much bigger impact on consumption than the renewed volatility in financial markets. The economy needs to pivot back to its traditional growth drivers in 2016 to sustain expansion. A warmer property market will provide some support, but the government also needs to accelerate efforts to restructure industry and tackle overcapacity.
Growth of 6.8 per cent in the fourth quarter and 6.9 per cent for 2015 as a whole, were in line with our estimates and we will not be changing our forecasts. The EIU currently sees growth easing to 6.5 per cent in 2016 and further thereafter.”
12:19 pm By Jessie Lau
The Hang Seng Index finished the morning session higher by 0.78 per cent or 149.30 points at 19,386.75, and the H-share index closed at 8,260.05, up 1.54 per cent or 125.24 points.
Below is the midday chart of the Hong Kong market. Hang Seng Index (yellow), H-share index (purple). The percentage at the end show the difference from the opening, not the previous close. Click to enlarge the chart.
12:15 pm By Laura He
While it’s doubtful that China’s official GDP figures should be taken at face value , the country’s economic growth does appear to have been broadly stable last quarter, said Capital Economics in a research note on Tuesday.
“For our part, we believe that the official GDP figures have become a poor gauge of the economy’s performance in recent years and now overstate growth by a wide margin,” said Julian Evans-Pritchard, China economist for the research firm, in the note.
However, he said concerns about China’s outlook are still overdone and that the recent market volatility has been driven more by sentiment than by economic fundamentals.
“If anything, with policy easing now providing greater support to activity, the short-run outlook is improving,” Evans-Pritchard said, “It’s notable that growth on our China Activity Proxy (CAP), although much slower than the official figures show, has actually edged up slightly since Q1 2015 when growth slowed sharply from 5.5% y/y to 4.0% on the back of a sudden drop-off in fiscal spending.”
Among other economic data released Tuesday, industrial output growth and fixed investment growth both weakened in December, while consumer demand seems to have remained resilient, as retail sales are still growing faster than during most of last year, he said.
Looking ahead, Evans-Pritchard expected China’s economic data to “gradually turn more upbeat” over the next few months, as “tailwinds from recent policy stimulus are still gathering”.
11:38 am By Jessie Lau
The Shanghai Composite Index closed 1.64 per cent or 47.74 points higher at 2,961.58, while the CSI 300 finished at 3,173.49, up 1.37 per cent or 42.76 points.
The Shenzhen Composite Index finished at 1,856.08, up 1.41 per cent or 25.76 points, while the Nasdaq-style ChiNext rose 0.78 per cent or 17.02 points to 2,191.96.
Below is the midday chart for the mainland market. Shanghai Composite Index (yellow), Shenzhen Composite Index (green), CS1300 Index (purple) and ChiNext (blue). The percentage at the end of the chart represents the difference from the opening, not from previous close. Click to enlarge the chart.
11:23 am By Enoch Yiu
Claudio Piron, a forex and fixed-income strategist for emerging Asia at Bank of America Merrill Lynch, said:
“For many years the prospect of weaker-than-expected growth in Chinaor a large-scale onshore yuan (CNY) devaluation has loomed large as a Black Swan event risk - something very difficult to predict, but with potentially far reaching negative consequences. This is especially so for Hong Kong given its proximity and close economic ties to China.”
“We argue that while Hong Kong’s currency board remains very robust, it will likely remain prone to markets pricing in a risk premium. This is already evident in the FX (forex) options market, which is pricing-in the tail risk of a move outside of the 7.75-7.85 band. However,we believe this risk premium may become increasingly evident in the interest rate market.”
“We recommend investors to hedge against the rising risk of weaker-than-expected growth in China and the likelihood of a rising risk premium in HK dollar rates over and above US dollar equivalents….We note liquidity in swaps has deteriorated and the market is already moving to price in risk premium.”
11:16 am By Enoch Yiu
DBS said in a report:
“The reserve requirement ratio that China intends to impose on offshore CNY bank accounts will probably deter speculation against the offshore yuan (CNH) for now. Moreover, the weighted RMB index is around the floor of its stable band. This suggests that both the onshore CNY and offshore CNH have scope to remain stable even if the basket of currencies depreciates. Given its strong trade and investment links with China and Asia ex-Japan, the Australian dollar could end up as a proxy for the weak CNY play instead.
There are signs that the Hong Kong dollar could be another proxy. USD/HKD hit, for the first time since Sept 2011, 7.80 or the mid-point of its 7.75-7.85 convertibility band. The Hang Seng Index first broke below the psychological 20,000 level on 11 Jan when China stepped up efforts to rein in the CNH. The 3-month HK dollar Hibor broke above 0.40 per cent the next day. The rate closed yesterday at 0.4487 per cent, up from 0.39457 per cent at end-2015, but was still below the 3M (three-month) USD Libor (0.6196% per cent).
While it expects capital outflows to push USD/HKD to the upper limit of the band, the Hong Kong Monetary Authority also reaffirmed its commitment to the peg to the US dollar.”
11:09 am By Enoch Yiu
Offshore yuan softened to 6.5948, weaker by 0.19 per cent after a 0.5 per cent gain on Monday and a 1 per cent rise last week.
The yuan has been gaining after the PBOC intervened in the markets last week to curb the currency speculation, which has led the offshore rate to depreciate 1.72 per cent in the first week of this year.
On Monday, the central bank announced a new move to impose the reserve requirement ratio on some foreign banks from January 25, which would add costs for speculators on short-selling the yuan.
Meantime, onshore yuan traded unchanged at 6.5791.
10: 49 am By Jessie Lau
The Hang Seng Index dipped 0.1 per cent to 19,212,81, while the H-share index was still up 0.1 per cent 8,145.84.
The Shanghai Composite Index was lower by less than 0.1 per cent at 2,912.72, and the CSI 300 edged down 0.2 per cent to 3,125.86.
The Shenzhen Composite Index also dropped 0.2 per cent to 1,827.30, and the Nasdaq-style ChiNext lost 0.9 per cent to 2,156.07.
10:38 am By Jessie Lau
In December, China’s industrial production increased 5.9 per cent year-on-year, down from 6.2 per cent in November. Meantime, retail sales rose 11.1 per cent year-on-year, also lower than November’s 11.2 per cent. Fixed-asset investment, excluding rural areas, jumped 10 per cent in December, compared with 10.2 per cent in the previous month.
10:14 am By Jessie Lau
Hong Kong and mainland markets reacted positively to the Chinese economic data.
Hong Kong’s Hang Seng Index gained 0.94 per cent or 180.64 points to 19,418.09, and the H-share index that tracks mainland companies listed in Hong Kong advanced 1.56 per cent or 127.09 points to 8,261.90.
Meantime, the Shanghai Composite Index rose 0.60 per cent or 17.52 points to 2,931.36 and the CSI 300, which tracks the large-caps listed in Shanghai and Shenzhen, added 0.41 per cent or 12.72 points to 3,143.45.
The Shenzhen Composite Index reversed its morning losses, up 0.49 per cent or 9.06 points at 1,839.39. However, the Nasdaq-style ChiNext remained weak, down 0.15 per cent or 3.26 points to 2,171.68.
10:06 am By Jessie Lau
The Chinese economy grew 6.9 per cent in 2015 and 6.8 per cent in the fourth-quarter, broadly in line with market expectations, according to latest data from the country’s National Bureau of Statistics.
9:49 am By Laura He
As investors brace for Chinese growth data due later today, the country’s stock markets could see a rebound if the actual data beat estimates, said Angus Nicholson, an analyst for IG Group.
“Given the pick-up in a range of Chinese activity data we have seen in November and December, there is a decent possibility we actually see a slight beat for GDP, IP (industrial production) and FAI (fixed-asset investment),” he said.
“If this were to occur, alongside further gains in Chinese equities, markets could be in for a short-term bounce today as they come off heavily-sold levels,” Nicholson added.
Here are some estimates for the Chinese economic figures by IG Group:
- Q4 GDP up 6.9 per cent year-on-year
- Retail sales up 11.3 per cent
- Industrial production up 6.1 per cent year-on-year
- Fixed asset investment up 10.2 per cent
9:45 am By Jessie Lau
Hong Kong and Chinese stocks both opened higher. Hong Kong’s Hang Seng Index traded at 19,337.89, up 0.52 per cent or 100.44 points, and the Hang Seng Enterprises index rose 0.51 per cent or 41.23 points to 8,176.04.
Over on the mainland, the Shanghai Composite Index opened at 2,923.19, up 0.32 per cent or 9.35 points, and the CSI300, which tracks the large caps listed in Shanghai and Shenzhen, gained 0.22 per cent or 6.93 points to 3,137.66.
However, the Shenzhen Composite Index fell 0.27 per cent or 4.86 points to 1,825.47, while the Nasdaq-style ChiNext dropped 0.22 per cent or 4.84 points to 2,170.09.
9:36 am By Enoch Yiu
Hong Kong dollar continued falling Tuesday morning, trading at 7.8040 against the US dollar, a fresh new four-year low. It is down 0.06 per cent from Monday.
The weak local economy and stock market slump has caused capital outflows from the city and led the currency weaker.
9:24 am By Enoch Yiu
The People’s Bank of China set the yuan’s mid-price against the US dollar at 6.5596, 6 basis points weaker than Monday, when it set the mid-price 47 basis points stronger.
It also set the yuan’s mid-price against the euro stronger by 215 basis points to 7.1487. The yuan’s reference rate for every 100 yen was stronger by 215 basis points to 5.5884, and its mid-price against the pound was 63 basis points stronger at 9.3640.
Traders are allowed to trade up to 2 per cent either side of the mid-price for the day.
9:06 am By Jessie Lau
The Hang Seng Index futures spot January contract opened relatively flat, up 0.05 per cent to 19,280 in the pre-trade session, while the H-share index futures were down 0.22 per cent at 8,150.
The US stock markets were closed Monday for the Martin Luther King Jr. Day holiday. Major indexes in Europe also closed lower on Monday, with the DAX falling 0.25 per cent or 23.42 points to 9,521.85, and the CAC retreating 0.49 per cent or 20.59 points to 4,189.57.
In Asia, Tokyo’s Nikkei225 slipped 0.28 per cent or 47.90 points to 16,907.67.