China stock market

China stocks cap worst month since 2008 on upbeat note

Faulty circuit breaker causes trading suspensions in early January as volatility rules; market dealings may slow as Chinese New Year beckons

PUBLISHED : Friday, 29 January, 2016, 6:54pm
UPDATED : Friday, 29 January, 2016, 9:54pm

Chinese stocks bounced back to close sharply higher on Friday, snapping a three-day losing streak, but still closed a volatile January with the worst monthly losses since October 2008.

The Friday rebound came after the People’s Bank of China injected a record weekly amount of cash into the banking system via short-term loans and the Bank of Japan surprised markets with its first negative policy rate in history to boost inflation.

Concerns over the economy continue to hang over the markets.

“Deteriorating economic fundamentals are weighing on the majority of investors,” said Xu Tongxun, an analyst at Caitong Securities.

Looking ahead, Christopher Cheung Wah-fung, the legislator representing brokers, said he expected the markets to be bumpy. “The Chinese economic slowdown and capital outflow means the bearish market sentiment will continue,” he said.

The Shanghai Composite Index jumped 3.1 per cent to close at 2,737.6 after three straight day of declines. However, the index still posted a weekly loss of 6.1 per cent. For the whole of January, it has lost 22.7 per cent, the worst monthly performance since October 2008. The losses have wiped out all the gains for 2015, when the index rose 9.4 per cent.

The large-cap CSI300 climbed 3.2 per cent to 2,946.09. The Shenzhen Composite Index rose 3.7 per cent to finish at 1,689.43 and the ChiNext Index gained 4.6 per cent to 1,994.06.

Turnover on Shanghai and Shenzhen markets increased slightly to 429 billion yuan, compared with 399 billion yuan in the previous session.

Hong Kong’s Hang Seng Index reversed opening losses and closed 2.5 per cent higher at 19,683.11, extending a three-day winning streak. For the week, the index is up 3.2 per cent. However, it still logged a 10.2 per cent loss for January, the biggest monthly decline since August.

Turnover for Hong Kong markets reached HK$91 billion on Friday, from HK$75.5 billion in the prior session.

Investors cheered supportive monetary policies from the central banks, as the People’s Bank of China on Friday pumped another 100 billion yuan into the money markets through reverse repurchase agreements, a type of short-term loan. This brought the weekly net cash injection to a record 690 billion yuan as the central bank acted to ease a seasonal cash crunch ahead of the Lunar New Year holiday when liquidity usually tightens.

Previously, the central bank had said it will conduct additional open market operations every day from January 29 to February 19, apart from its routine Tuesday and Thursday exercises.

On Friday, the Bank of Japan also said that it would cut its benchmark interest rate to minus 0.1 per cent starting February 16, its first negative policy rate, aiming to boost inflation and prop up the economy.

In Shanghai, financial stocks posted a broad advance as Huatai Securities surged by the 10 per cent upper limit to close at 14.58 yuan, Haitong Securities rose 6 per cent to 12.11 yuan, China Everbright Bank added 3.2 per cent to close at 3.57 yuan, and Agricultural Bank of China gained 2.8 per cent to 2.99 yuan.

After the markets closed on Friday, a spokesman for the China Securities Regulatory Commission said at the weekly press conference that the balance for margin financing and short selling were 915 billion yuan as of Thursday, while risk control levels for the business are “within safe ranges”.

Elsewhere in Asia, markets recorded broad-based gains as Tokyo’s Nikkei Average rallied 2.8 per cent to 17,518.30 and Sydney’s S&P/ASX 200 added 0.6 per cent to close at 5,005.50.

With additional reporting from Enoch Yiu