5 things traders are watching for as China’s power elite gathers at the ‘two sessions’
- Hugely important decisions will be made that could impact China stocks
- Traders say stocks that might be most affected are tied to consumption, autos, construction, health care and brokerages
China’s economic and political power players will flood into Beijing this week to determine the country’s future agenda. Markets can be expected to react.
The ‘two sessions’, or Lianghui, are the annual parliamentary meetings of China’s main legislative and political bodies: the National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference. Decisions here filter through the nation and have implications worldwide.
This year’s gathering, beginning Tuesday and going on for about two weeks, comes in the middle of a trade war with the US, amid the roll-out of plans for 11 integrated cities to form an innovation and financial hub called the Greater Bay Area, and as the Shanghai Composite Index swung from a bear to bull market in 32 trading days, adding US$1 trillion to the market.
Meanwhile, newly appointed top securities regulator Yi Huiman sounded a warning to investors about risks to China’s capital markets. Yi said he wants to create a “standardised, transparent and open market,” vowing to dissolve dangers in areas like stock pledges, bond defaults and private equity funds.
“There is a myth in China that whenever big meetings happen, the market plunges,” said Lu Shunxi, a Shanghai-based trader and investment director.
It becomes self-fulfilling as investors sell in advance to protect themselves, but, he said, “I don’t think the market will be falling again during the meetings.”