Mainland markets set for strong start to new year
The mainland's stock markets are likely to make a bullish start to the Year of the Snake when trading resumes today, after a week-long holiday.
Backed by signs of a solid economic recovery, stocks in the financial, infrastructure and agricultural sectors are likely to outperform the market ahead of the annual meetings of the legislature and the top advisory body next month, analysts said.
The Year of the Dragon ended with a 4.8 per cent gain in the Shanghai Composite Index, which reached 2,432.4 points on February 8, the last trading day, and it could approach the 2,480-point level, said Castor Pang, the head of research at brokerage firm Core Pacific-Yamaichi.
"The economic indicators released before the week-long holiday confirmed the recovery in the country's economy and this will be positive for the stock markets," Pang said.
The data showed strong export growth in January and revealed the mainland's economy was on track for a solid recovery, said Li Daxiao, a director of Shenzhen-based Yingda Securities.
"The economic recovery will continue to drive up the A-share markets this year, but investors should beware of volatility as the stocks have rebounded a lot," Li said.
The Shanghai Composite Index has surged 24.8 per cent since December, after hitting a year-low of 1,949 points.
In contrast to a strong start by mainland markets in the new year, a lacklustre performance by markets elsewhere in Asia could raise doubts about the recovery, Li said. Hong Kong's Hang Seng index closed 0.13 per cent down on Friday, while Japan's Nikkei-225 Index lost 1.18 per cent.
The markets in Taiwan and Vietnam will also reopen today.
Inflation data released in China before the holiday showed a 2 per cent rise in consumer prices last month, slowing from a 2.5 per cent increase in December.
"As long as the inflation rate is less than 2 per cent, I don't expect the government to launch any measures to curb rising consumer prices, and this will no doubt be positive for the stock markets," Pang said.
He expects no major changes to financial policies ahead of the National People's Congress and the Chinese People's Political Consultative Conference to be held next month.
"The government will likely confirm its financial policies during the meetings that will mainly aim to maintain stable economic growth," he said.
Li was bullish about prospects for the financial, property and infrastructure sectors.
"The central government is likely to announce some proactive fiscal policies that will help foster economic growth," he said.