China stocks eke out gains as Fed meeting, China policies eyed

Chinese markets squeezed out tiny gains on Tuesday after shaking off early sharp losses, as investors looked ahead to a highly anticipated Federal Reserve policy meeting later in the day and results of a key meeting of the Communist Party’s leadership discussing economic policies for the next five years.

Shanghai stocks recovered from a slide in the morning and finished the day’s volatile session marginally higher, with the benchmark Shanghai Composite Index up 0.1 per cent at 3,434.34. The large-cap CSI300 also nudged 0.1 per cent higher to 3,592.88. The Shenzhen Composite Index rose 0.7 per cent to 2,043.78 and the ChiNext Index advanced 1.4 per cent to 2,563.96.

Hong Kong markets also erased early drops in afternoon trading, with the Hang Seng Index finishing up 0.1 per cent at 23,142.73. However, the Hang Seng China Enterprises, or the H-share index, still closed in the negative territory, down 0.3 per cent at 10,714.79.

Turnover decreased in Hong Kong to HK$69 billion, compared with Monday’s HK$72.8 billion. In Shanghai, shares worth 409 billion yuan changed hands, down from Monday’s 455 billion yuan.

The Federal Reserve is scheduled to hold a two-day policy meeting on Tuesday and release a statement on Wednesday, amid expectations that the central bank may continue to keep interest rates unchanged at record lows.

Policymakers from Bank of Japan (BoJ) are also set to gather on Friday and discuss rates and stimulus moves.

Analysts said investors are reluctant to make major bets ahead of key central bank decisions.

“Traders are largely sitting on the sidelines at the moment,” said Angus Nicholson, analyst at IG Group.

“For markets to rally further, we would probably need to see the Fed definitively push their first rate hike out into 2016 in the dot plots and the BoJ step up its monetary stimulus,” he said, adding that the former is likely but the latter is more of a “close call”.

Meanwhile, analysts said the initial volatility in Chinese markets may be caused by investors’ profit-taking on previous weeks’ gains as they liquidate their positions and await news from the Communist Party’s fifth plenum.

The ongoing plenary meeting may bring some “short-term, structural buying opportunities”, analysts from GF Securities said.

In Hong Kong, Belle International, one of China’s largest footwear retailers, rose 6.1 per cent to HK$7.7, making it the biggest percentage gainer among Hang Seng components. The company reported better-than-expected interim results, with its net profit up 3.9 per cent year on year during the six-month period through August.

Ali Health, a healthcare subsidiary of Chinese e-commerce giant Alibaba, jumped 6.3 per cent to HK$6.3 as investors eagerly awaited the company’s second-quarter results due later in the day. Alibaba’s revenue jumped 32 per cent in the July-to-September period.

Ali Pictures, a film production company owned by Alibaba, also rose 1 per cent to HK$2.12.

Major state-owned electricity generators fell, with Hang Seng constituent China Resources Power tumbling 3.8 per cent, the worst performer among blue-chip stocks, after state media reported that China may cut on-grid electricity prices by the end of the year.

In the currency market, the People’s Bank of China set the yuan’s mid-price at 6.3949 on Tuesday, 55 basis points, or 0.09 per cent, stronger against the US dollar.

The spread between the onshore and offshore yuan currently hovers around 390 basis points, with onshore yuan ending at 6.3517 against the US dollar and offshore yuan trading at 6.3910.