Hong Kong Stock Exchange

China stocks jump to strong close after central bank pours in cash

Business seen thinning out as Lunar New Year approaches next week

PUBLISHED : Tuesday, 02 February, 2016, 9:21am
UPDATED : Tuesday, 02 February, 2016, 5:35pm

China’s equity markets closed sharply higher on Tuesday after the People’s Bank of China poured in 1.52 trillion yuan into the system from last month, aiming to ease a seasonal cash squeeze ahead of the Lunar New Year holidays.

The Shanghai Composite index jumped 2.26 per cent or 60.72 points to settle at 2,749.57, while the CSI 300 index for large cap stocks in Shanghai and Shenzhen rose 2.08 per cent or 60.28 points to close at 2,961.33.

The Shenzhen Composite index also gained 3.42 per cent or 57.18 points to 1,729.09, while the Nasdaq-style ChiNext index increased 4.14 per cent or 82.59 points to 2,075.29.

Hong Kong stocks however closed lower, with the session dragged down by a slide in the energy sector after oil shares plunged overnight in overseas markets.

The Hang Seng Index bucked closed 0.76 per cent or 148.66 points weaker at 19,446.84, while the H-share index dropped 1.06 per cent or 86.02 points to finish at 8,058.83.

Markets got a strong boost from the PBOC’s latest move on Tuesday to inject 100 billion yuan into money markets via reverse repurchase agreements. Last month, the central bank pumped in more than 1.5 trillion yuan of liquidity into banks via Standing Lending Facilities (SLF), Medium-term Lending Facilities (MLF), and Pledged Supplementary Lending (PSL).

“Ahead of the Lunar New Year, the Chinese government wants to put more money into the market. If they don’t inject more money, they will push up the overnight (interest) rate,” said Louis Tse Ming-kwong, director of VC Brokerage, adding the markets fell on Monday because short term investors used the release of slightly worse than expected purchasing managers’ index data as an “excuse” to sell and take money off the table.

The PBOC said last week it would conduct additional daily open market operations during the working days from January 29 to February 19, apart from its routine exercises on Tuesday and Thursday, a move seen by markets as an attempt to reduce the seasonal liquidity pressure during the week-long Lunar New Year holiday which starts on Sunday.

Leading the gains in the A share market is Aluminum Corporation of China, up by about 10.08 per cent to 4.04 yuan while its H share stock rose by about 3 per cent in a 10-day high at HK$2.40. Anhui Expressway rose about 9.85 per cent to a one-month high of 13.83 yuan, and Luoyang Glass gained about 8.37 per cent to 31.97 yuan.

Other A share stocks that performed well and include Nanjing Panda Electronics, up about 5.71 per cent to 11.67 yuan, Shandong Xinhua Pharmaceutical, up about 5.33 per cent to 10.87 yuan and properties company Beijing North Star, up about 5.29 per cent to 3.98 yuan.

Tse said that the A share market will follow currency trends and look to new economic data from China moving forward.

Northbound trading in the mainland’s A Share market through the Shanghai-Hong Kong Stock Connect saw a turnover of about HK$4.31 billion, higher than the approximately HK$2.25 billion turnover seen in the southbound trade.

“For the coming three days, we (won’t) have that many economic data from China. That could (be released) after the new year,” Tse said. “Everybody wants to feel merry during the Lunar New Year.”